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Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker |
| Selling price per unit on the intermediate market | $42 |
| Variable costs per unit | $19 |
| Fixed costs per unit (based on capacity) | $7 |
| Capacity in units | 56,000 |
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Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 11,000 speakers per year. It by Solid Savings” href=”http://ezto.mhecloud.mcgraw-hill.com/#” class=”c11″> |
| Requirement 1: |
| Assume that the Audio Division is now selling only 45,000 speakers per year to outside customers. |
| (a) |
From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? (Omit the “$” sign in your response.) |
| Transfer price | $ |
| (b) |
What is the range of transfer price the manager’s of both divisions should by Solid Savings” href=”http://ezto.mhecloud.mcgraw-hill.com/#” class=”c11″>agree? (Omit the “$” sign in your by Solid Savings” href=”http://ezto.mhecloud.mcgraw-hill.com/#” class=”c11″> |
| From $ to $ |
| (c) |
If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 11,000 speakers |
| (Click to select)YesNo |
| (d) | From the standpoint of the entire company, should the transfer take place? |
| (Click to select)Transfer should not take placeTransfer should take place |
| Requirement 2: |
| Assume that the Audio Division is selling all of the speakers it can produce to outside customers. |
| (a) |
From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? (Omit the “$” sign in your response.) |
| Transfer price | $ |
| (b) |
From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? |
| Transfer price | $ |
| (c) |
If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 11,000 speakers |
| (Click to select)YesNo |
| (d) | From the standpoint of the entire company, should the transfer take place? |
| (Click to select)Transfer should not take placeTransfer should take place |
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