Infobytes Corporation Infobytes Corporation manufactures and sells various high-tech office automation products.Two divisions of Infobytes Corporation are the Computer Chip Division and the Computer Division.The Computer Chip Division manufactures one product,a "super chip," that can be used by both the Computer Division and other external customers.The following information is available on this month's operations in the Computer Chip Division:
Presently,the Computer Division purchases no chips from the Computer Chips Division,but instead pays $45 to an external supplier for the 4,000 chips it needs each month.
Refer to Infobytes Corporation.Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month.What is the maximum of the transfer price range for a possible transfer of the chip from one division to the other?
A)$50
B)$45
C)$35
D)$30

Question

Infobytes Corporation Infobytes Corporation manufactures and sells various high-tech office automation products.Two divisions of Infobytes Corporation are the Computer Chip Division and the Computer Division.The Computer Chip Division manufactures one product,a "super chip," that can be used by both the Computer Division and other external customers.The following information is available on this month's operations in the Computer Chip Division:
 Presently,the Computer Division purchases no chips from the Computer Chips Division,but instead pays $45 to an external supplier for the 4,000 chips it needs each month.
Refer to Infobytes Corporation.Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month.What is the maximum of the transfer price range for a possible transfer of the chip from one division to the other?
A)$50 
B)$45 
C)$35 
D)$30

Quizplus · Accepted Answer

The maximum transfer price should not exceed the external market price that the Computer Division is currently paying, which is $45 per chip. Therefore, the transfer price range for possible transfers from the Computer Chip Division to the Computer Division is $0 to $45 per chip. The best choice is B) $45, as this is the highest price that the Computer Division would be willing to pay for the chips, and it is also a fair price for the Computer Chip Division to receive for its product.

Infobytes Corporation Infobytes Corporation Manufactures and Sells Various High-Tech Office