Sako Company\'s Audio Division produces a speaker that is used by manufacturers

Question

Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units 43 19 7 65,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The HiFi Division will need 1,000 speakers per year. It has received a quote of $32 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits

Explanation / Answer

Audio division is selling all the produced speakers to the outside customers and full demand avaliable to the product and transfer price is less than the selling price to outside customers there is no acceptable range of transfer price

Since all the products are selling price more than transfer price Manager won't agree on trasnfer price

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