The Watkins Company is decentralized, and divisions areThe Basketball Equipment

Question

The Watkins Company is decentralized, and divisions areThe Basketball Equipment Division can purchase a similar considered investment centers. Watkins specializes in sports heavy-duty net from an outside vendor for $15. equipment, and one division manufactures netting that is used for basketball hoops, soccer goals, and other sports Read the requirements. equipment. The Netting Division reports the following nformation for a heavy-duty basketball hoop net: EE (Click the icon to view the data.) Requirement 1. Determine the negotiable range for the transfer price. The negotiable range for the transfer price is to Requirement 2. What is the minimum transfer price the Netting Division should consider if operating at capacity? Below capacity? The minimum transfer price the Netting Division should consider, if operating at capacity, is ?-they are below capacity then the minimum transfer price would be Requirement 3. What is the maximum transfer price the Basketball Equipment Division should consider? The maximum transfer price the Basketball Equipment Division should consider is

Explanation / Answer

Answer 1

Note : Netting division will expect to recover atleast the variable costs from the units transfer to basketball equipment division ie $6 & on atmost it can expect to the recover the regular selling price per unit from units transfer to basketball equipment division ie $18.

The negotiable range of transfet price is $6 to $18

Answer 2

Note : When Netting division operates at full capacity it will expect to have a minimum transfer price =Selling price per unit ie $18. When operating below capacity , Netting division will expect to a minimum transfer price = Variable cost per unit ie $6 .

The minimum transfer price the Netting Division should consider, if operates at capacity, is $18. If they are below capacity, then the minimum transfer price would be $6

Answer 3

Note : The maximum price that the basketball division is willing to pay to Netting division for the units tranfer will the price at which it purchase units from outside vendor ie $15

The maximum price that the Basketball Equipment Division should consider is $15

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