Lank Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter. Data concerning that transmitter appear below:
The company has a Remote Devices Division that could use this transmitter in one of its products. The Remote Devices Division is currently purchasing 11,000 of these transmitters per year from an overseas supplier at a cost of $53 per transmitter.
Required:
The Transmitter Division is selling all of the transmitters it can produce to outside customers. Also assume that $6 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions?

Question

Lank Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter. Data concerning that transmitter appear below:
  The company has a Remote Devices Division that could use this transmitter in one of its products. The Remote Devices Division is currently purchasing 11,000 of these transmitters per year from an overseas supplier at a cost of $53 per transmitter.
Required:
The Transmitter Division is selling all of the transmitters it can produce to outside customers. Also assume that $6 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions?

Quizplus · Accepted Answer

The Answer of Lank Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter. Data concerning that transmitter appear below:
  The company has a Remote Devices Division that could use this transmitter in one of its products. The Remote Devices Division is currently purchasing 11,000 of these transmitters per year from an overseas supplier at a cost of $53 per transmitter.
Required:
The Transmitter Division is selling all of the transmitters it can produce to outside customers. Also assume that $6 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions?