Exercise 172 (Part Level Submission) Pert Corporation manufactures state-of-the-
ID: 2576956 • Letter: E
Question
Exercise 172 (Part Level Submission)
Pert Corporation manufactures state-of-the-art DVD players. It is a division of Vany TV, which manufactures televisions. Pert sells the DVD players to Vany, as well as to retail stores. The following information is available for Pert's DVD player: variable cost per unit $60; fixed costs per unit $45; and a selling price of $150 to outside customers. Vany currently purchases DVD players from an outside supplier for $140 each. Top management of Vany would like Pert to provide 50,000 DVD players per year at a transfer price of $60 each.
(a)
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(b)
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Exercise 172 (Part Level Submission)
Pert Corporation manufactures state-of-the-art DVD players. It is a division of Vany TV, which manufactures televisions. Pert sells the DVD players to Vany, as well as to retail stores. The following information is available for Pert's DVD player: variable cost per unit $60; fixed costs per unit $45; and a selling price of $150 to outside customers. Vany currently purchases DVD players from an outside supplier for $140 each. Top management of Vany would like Pert to provide 50,000 DVD players per year at a transfer price of $60 each.
Explanation / Answer
Minimum transfer price = $150(selling price to outside customers)
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