The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a market price of $92 each. Each trailer incurs $32 of variable manufacturing costs. The Trailer division has capacity for 26,000 trailers per year and has fixed costs of $430,000 per year. 1. Assume the Assembly division of Baxter Bicycles wants to buy 5,900 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used on transfers between divisions? 2. Assume the Trailer division currently only sells 9,600 trailers to outside customers and has excess capacity. The Assembly division wants to buy 5,900 trailers per year from the Trailer division. What is the range of acceptable prices on transfers between divisions? 1. Transfer price per trailer 2. Transfer price per trailer will be at least but not more than
The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a market price of $92 each. Each trailer incurs $32 of variable manufacturing costs. The Trailer division has capacity for 26,000 trailers per year and has fixed costs of $430,000 per year. 1. Assume the Assembly division of Baxter Bicycles wants to buy 5,900 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used on transfers between divisions? 2. Assume the Trailer division currently only sells 9,600 trailers to outside customers and has excess capacity. The Assembly division wants to buy 5,900 trailers per year from the Trailer division. What is the range of acceptable prices on transfers between divisions? 1. Transfer price per trailer 2. Transfer price per trailer will be at least but not more than
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a
market price of $92 each. Each trailer incurs $32 of variable manufacturing costs. The Trailer division has capacity for 26,000 trailers
per year and has fixed costs of $430,000 per year.
1. Assume the Assembly division of Baxter Bicycles wants to buy 5,900 trailers per year from the Trailer division. If the Trailer
division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used
on transfers between divisions?
2. Assume the Trailer division currently only sells 9,600 trailers to outside customers and has excess capacity. The Assembly
division wants to buy 5,900 trailers per year from the Trailer division. What is the range of acceptable prices on transfers
between divisions?
1. Transfer price per trailer
2. Transfer price per trailer will be at least
but not more than
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