Tint Company has two divisions,Blue and Green.Blue produces an item that Green could use in its production.Green currently is purchasing 150,000 units from an outside supplier for $23 per unit.Blue is currently operating at full capacity of 1,600,000 units and has variable costs of $14 per unit.The full cost to manufacture the unit is $18.Blue currently sells 1,600,000 units at a selling price of $25 per unit.
a.What will be the effect on Tint Company's operating profit if the transfer is made internally?
b.What is the minimum transfer price from Blue's perspective?
c.What is the maximum transfer price from Green's perspective?

Question

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The Answer of Tint Company has two divisions,Blue and Green.Blue produces an item that Green could use in its production.Green currently is purchasing 150,000 units from an outside supplier for $23 per unit.Blue is currently operating at full capacity of 1,600,000 units and has variable costs of $14 per unit.The full cost to manufacture the unit is $18.Blue currently sells 1,600,000 units at a selling price of $25 per unit.
a.What will be the effect on Tint Company's operating profit if the transfer is made internally?
b.What is the minimum transfer price from Blue's perspective?
c.What is the maximum transfer price from Green's perspective?

Tint Company Has Two Divisions,Blue and Green