Help Save & Exlt Submit Saved Chapber 11 HW Check my work Sako Company\'s Audio
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Help Save & Exlt Submit Saved Chapber 11 HW Check my work 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 0.71 polnts elling prloe per unit on the internedlate market Varlable costa per unit 40 $ 20 Pixed costa per unit (based on eapecity) Capacity in units 58,000 The Hi-Fi Division wil need 11,000 Sako Comp?ny has a Hi-fi Division that could use his speaker in one of its products. division managers on the basis ofdivisional pronts. Assume the Audio Division is now selling only 47000 speakers per year to outside customers t has received a quote of $36 per speaker from enother manufacturer. Seko Company eveluetes a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-FI Division? Print O A. Fio ine stdit f thH-FI Division what is the highest acceptable transter price for speakers acquired from the lersces c Whet is the range of acceptable trensfer prices Of amy) between the two divisions? If left free to negotiate without transfer of 11,000 speakers from the Audio Interference, would you expect the dMision managers to voluntarily agree to the Division to the Hi-F DMslon? d. From the standpolint of the entire company, should the transfer take place? 2. Assume the Audio Division is seling al of the speakers it can produce to outside customers a From the standpoint of the Audio Division, whet is the lowest acceptable trensfer price for speakers sold to the Hi-F Division? b. From the standpoint of the Hi-FI Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (f any) between the two divisions? i left free to negotiate without Interference, would you expect the division managers to voluntarily agree to the transfer of 11,000 speakers from the Audio Division to the Hi-FI Division? d. From the standpoint of the entire company, should the transfer take place? Complete this question by entering your answers in the tabs below. Req IA Req 1 Req 1 Reg 1DReq 2Ae 2 Req 2C what is the lowest acceptable transfer price for speakers sold to the Hi-Fi From the standpoint of the Audio Division, the lowest Division? Assume the Audio Division is now selling only 47,000 speakers per year to outside customers. Req 1A Req 1B > Prey 1or7 Next>Explanation / Answer
Answer 1(a) Computation of lowest acceptable price for the speaker to be sold be HI-FI Amount($) Variable Cost 20 Fixed Cost 7 27 Explanation : Lowest price for Audio Division would be a no profit no loss price i.e. a price in which it can recover its fixed and variable cost. Answer 1(b) Computation of Highest acceptable price for the speaker to to be accepted from Audio Division is $ 36 as this is the price at which it has received quotation from another manufacturer. Paying more than this price will result in opportunity loss for the HIFI division. Answer 1(c) Range of Acceptable transfer price between the two division would be lowest price in which Audio Division can sell its component and the highest price in which the Hi-Fi division can purchase the components i.e.$27-$36 (as computed above.) Part 2 Assuming that the Audio Division has no other buyer outside at the present selling price , the divisional managers can agree at any price range between $27-$36 as deal at price in this range would be beneficial for both the divisional managers. Ideal transfer price would be average range price i.e.highest+lowest/2((27+36)/2)=$31.5 at this price gain would be shared equally by both the managers . Answer 1(d) From the stand point of the entire company the deal should take place due to the following (a)Audio division can achieve 100% utilization due to this deal. (b)From the stand point of company as a whole the effective price of speaker would be $27 if purchased through this deal compared to $36 if purchased from outside manufacturer. Answer 2(a) From the Standpoint of Audio Division the lowest acceptable transfer price for speakers to Hi-Fi division would be the price it is receiving presently from the outside buyers. In case speakers are transferred at a price less than the Outside Sale Price it would be notional loss to the division. The price would be $40. Answer 2(b) From the standpoint of Hifi Division the Highest acceptable transfer price for speakers from Audio Division would be the price quoted by outside manufacturer. Acceptance at any price grater than the quotation of outside manufacturer would be notional loss to the Hi-Fi Division. The price would be $36. Answer 2(c) Part 1 Range of acceptable transfer price could be created if the minimum expectation of Audio Division could be lower than the highest expectation of Hi-Fi division .In this scenario the minimum Expectation of Audio Division($40) is higher than the maximum expectation of Hi-Fi Division($36) hence there is no range. Part 2 If left free to discuss without any interference, we would not expect the managers to voluntarily agree for transfer of 11,000 speakers as there is no price at which both the managers would be earning profit. At each price either of the managers would incur loss. Answer 2(d) In this Scenario from the standpoint of the company the transfer should not take place as : (a)Audio division can then sell the speakers to outside buyers at $40 per speaker. (b)Hi-Fi division can purchase speaker at $36 per speaker. Hence their would be gain of ($40-$36)=$4 per speaker in case transfer is not done.
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