*For the following Requirements, the drop down menus allow you to choose $3, $5,

Question

*For the following Requirements, the drop down menus allow you to choose $3, $5, or $6

Henderson Company manufactures electronics. The Calculator Division (an investment center) manufactures handheld calculators. The division can purchase the batteries used in the calculators from the Battery Division (another investment center) or from an outside vendor. The cost to purchase batteries from the outside vendor is $5. The transfer price to purchase from the Battery Division is S6. The Battery Division also sells to outside customers. The sales price is $6, and the variable cost is S3. The Battery Division has excess capacity Read the requirements Requirement 1. Should the Calculator Division purchase from the Battery Division or the outside vendor? O A. The Calculator Division should purchase from the outside vendor as long as the transfer price is $5.00 or less because the Battery Division has excess capacity B. The Calculator Division should purchase from the Battery Division as long as the transfer price is $5.00 or less because the Battery Division has excess capacity. OC. The Calculator Division should purchase from the Battery Division as long as the transfer price is $6.00 or less because the Battery Division has excess capacity O D. The Calculator Division should purchase from the outside vendor as long as the transfer price is $3.00 or more because the Battery Division is operating at capacity

Explanation / Answer

Answer:

1

The Calculator Division should purchase from the outside vendor because the cost is lower by one dollar.

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2

The maximum transfer price the Calculator Division should consider is $5.00

Explanations:

Here maximum transfer price consider as $ 5 because that is what it can obtain the batteries for from the outside vendor.

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3

The minimum transfer price the Battery Division should consider is $3.00,

Explanations:

Here maximum transfer price the Battery Division should consider as $3 because that is its variable cost.

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4

If the Battery Division is operating at capacity, the minimum transfer price should be $6.00,

Explanations:

its sales price to outside customers.

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