Use the following information to complete Problems below
Komfort Mattress Co. produces foam-topped mattresses and foam mattress pads. The mattress pads were originally designed to be a component of the mattresses (1 pad per mattress). However, the market for mattress pads was profitable enough that management has opted to sell some of the pads on their own. Any pads produced beyond what is necessary to meet the needs of mattress production are sold at market prices. Normally, the transfer cost of the pads is equal to the market sale price. Because of the differentiation strategy, management at Komfort has decided that the Mattress department and the Pads department should be measured and tracked separately. When pads are transferred to the Mattress department, they are inventoried at market prices.
The following information relates to the costs of production for the year for the two departments. Per the company policy, all inventories are kept at stable levels: in other words, sales and production are equal, and purchases of raw materials equal those requisitioned for production.

-Right at the end of the year, Komfort received a special order for 200 mattresses. The Mattress department has the capacity to meet the order, but the Pads department is already at full capacity. Komfort has found a supplier of pads to purchase from when the supply of pads runs short. However, due to the rush nature of the special order, Komfort's supplier would charge them $80,000.
What would be the minimum transfer price where the Pads department would agree to cancel current sales in order to fill this order? Should the Mattress department purchase the pads from the supplier or from the Pads department?

Question

Use the following information to complete Problems below
Komfort Mattress Co. produces foam-topped mattresses and foam mattress pads. The mattress pads were originally designed to be a component of the mattresses (1 pad per mattress). However, the market for mattress pads was profitable enough that management has opted to sell some of the pads on their own. Any pads produced beyond what is necessary to meet the needs of mattress production are sold at market prices. Normally, the transfer cost of the pads is equal to the market sale price. Because of the differentiation strategy, management at Komfort has decided that the Mattress department and the Pads department should be measured and tracked separately. When pads are transferred to the Mattress department, they are inventoried at market prices.
The following information relates to the costs of production for the year for the two departments. Per the company policy, all inventories are kept at stable levels: in other words, sales and production are equal, and purchases of raw materials equal those requisitioned for production.
  
-Right at the end of the year, Komfort received a special order for 200 mattresses. The Mattress department has the capacity to meet the order, but the Pads department is already at full capacity. Komfort has found a supplier of pads to purchase from when the supply of pads runs short. However, due to the rush nature of the special order, Komfort's supplier would charge them $80,000. 
What would be the minimum transfer price where the Pads department would agree to cancel current sales in order to fill this order? Should the Mattress department purchase the pads from the supplier or from the Pads department?

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The Answer of Use the following information to complete Problems below
Komfort Mattress Co. produces foam-topped mattresses and foam mattress pads. The mattress pads were originally designed to be a component of the mattresses (1 pad per mattress). However, the market for mattress pads was profitable enough that management has opted to sell some of the pads on their own. Any pads produced beyond what is necessary to meet the needs of mattress production are sold at market prices. Normally, the transfer cost of the pads is equal to the market sale price. Because of the differentiation strategy, management at Komfort has decided that the Mattress department and the Pads department should be measured and tracked separately. When pads are transferred to the Mattress department, they are inventoried at market prices.
The following information relates to the costs of production for the year for the two departments. Per the company policy, all inventories are kept at stable levels: in other words, sales and production are equal, and purchases of raw materials equal those requisitioned for production.
  
-Right at the end of the year, Komfort received a special order for 200 mattresses. The Mattress department has the capacity to meet the order, but the Pads department is already at full capacity. Komfort has found a supplier of pads to purchase from when the supply of pads runs short. However, due to the rush nature of the special order, Komfort's supplier would charge them $80,000. 
What would be the minimum transfer price where the Pads department would agree to cancel current sales in order to fill this order? Should the Mattress department purchase the pads from the supplier or from the Pads department?

Use the Following Information to Complete Problems Below