Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
|
|
| Selling price per unit on the intermediate market |
$42 |
| Variable costs per unit |
$19 |
| Fixed costs per unit (based on capacity) |
$7 |
| Capacity in units |
56,000 |
|
Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 11,000 speakers per year. It has received by Solid Savings" href="http://ezto.mhecloud.mcgraw-hill.com/#" class="c11">a quote of $29 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.
by Solid Savings" href="http://ezto.mhecloud.mcgraw-hill.com/#" class="c11">
Requirement 1:
Assume that the Audio Division is now selling only 45,000 speakers per year to outside customers.
(a) From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? (Omit the "tiny_mce_markerquot; sign in your response.)
Transfer price $
(b) What is the range of transfer price the manager's of both divisions should by Solid Savings" href="http://ezto.mhecloud.mcgraw-hill.com/#" class="c11">agree? (Omit the "tiny_mce_markerquot; sign in your response.)
by Solid Savings" href="http://ezto.mhecloud.mcgraw-hill.com/#" class="c11">
From $ to $
(c) If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 11,000 speakers from the Audio Division to the Hi-Fi Division?
(Click to select)YesNo
(d) From the standpoint of the entire company, should the transfer take place?
(Click to select)Transfer should not take placeTransfer should take place
Requirement 2:
Assume that the Audio Division is selling all of the speakers it can produce to outside customers.
(a) From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? (Omit the "tiny_mce_markerquot; sign in your response.)
Transfer price $
(b) From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? (Omit the "tiny_mce_markerquot; sign in your response.)
Transfer price $
(c) If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 11,000 speakers from the Audio Division to the Hi-Fi Division?
(Click to select)YesNo
(d) From the standpoint of the entire company, should the transfer take place?
(Click to select)Transfer should not take placeTransfer should take place?