Shaw is a lumber company that also manufactures custom cabinetry. It is made up

Question

Shaw is a lumber company that also manufactures custom cabinetry. It is made up of two divisions: Lumber and Cabinetry. The Lumber Division is responsible for harvesting and preparing lumber for use; the Cabinetry Division produces custom-ordered cabinetry. The lumber produced by the Lumber Division has a variable cost of $2.30 per linear foot and full cost of $3.30. Comparable quality wood sells or the open market for $6.90 per linear foot. (Enter your answers to 2 decimal places.) Required 1. Assume you are the manager of the Cabinetry Division. Determine the maximum amount you would pay for lumber. aximum Price 2. Assume you are the manager of the Lumber Division. Determine the minimum amount you would charge for the lumber if you have excess capacity. Repeat assuming you have no excess capacity Minimum Price with Excess Capacity Minimum Price without Excess Capacity 3. Assume you are the president of Shaw. Determine a mutualy beneficial transfer price assuming there is excess capacity. Mutually Beneficial Transfer Price

Explanation / Answer

1 Maximum price = $6.90 2 Minimum price with excess capacity 2.3 Minimum price without excess capacity 6.9 3 Mutually beneficial transfer price = $3.3 Note: In question 3 manager may also agree for a price of $2.3 as overall profit of company will be same for both prices

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