Exercise M-16 (Part Level Submission) Crede Inc. has two divisions. Division A m
ID: 2567672 • Letter: E
Question
Exercise M-16 (Part Level Submission)
Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps.
Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $ 9.83 from an outside vendor. Division A needs 10,500 lamps for the coming year.
Division B has the capacity to manufacture 50,400 lamps annually. Sales to outside customers are estimated at 39,900 lamps for the next year. Reading lamps are sold at $ 12.21 each. Variable costs are $ 7.42 per lamp and include $ 1.33 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $ 81,700 .
Consider the following independent situations.
(a)
Open Show Work
Exercise M-16 (Part Level Submission)
Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps.
Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $ 9.83 from an outside vendor. Division A needs 10,500 lamps for the coming year.
Division B has the capacity to manufacture 50,400 lamps annually. Sales to outside customers are estimated at 39,900 lamps for the next year. Reading lamps are sold at $ 12.21 each. Variable costs are $ 7.42 per lamp and include $ 1.33 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $ 81,700 .
Consider the following independent situations.
(a)
What should be the minimum transfer price accepted by Division B for the 10,500 lamps and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 10.50.)Minimum transfer price accepted by Division B $ per unit Maximum transfer price paid by Division A $ per unit Click if you would like to Show Work for this question:
Open Show Work
Explanation / Answer
Minimum transfer price accepted by Division B = 7.42-1.33 = 6.09 per unit Maximum transfer price paid by Division A = 9.83 per unit
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