Stibbins Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver. Data concerning that receiver appear below:
The company has a Industrial Products Division that could use this receiver in one of its products. The Industrial Products Division is currently purchasing 6,000 of these receivers per year from an overseas supplier at a cost of $79 per receiver.
Required:
a. Assume that the Receiver Division is selling all of the receivers it can produce to outside customers. What is the acceptable range, if any, for the transfer price between the two divisions?
b. Assume again that the Receiver Division is selling all of the receivers it can produce to outside customers. Also assume that $13 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

Stibbins Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver. Data concerning that receiver appear below:
  The company has a Industrial Products Division that could use this receiver in one of its products. The Industrial Products Division is currently purchasing 6,000 of these receivers per year from an overseas supplier at a cost of $79 per receiver.
Required:
a. Assume that the Receiver Division is selling all of the receivers it can produce to outside customers. What is the acceptable range, if any, for the transfer price between the two divisions?
b. Assume again that the Receiver Division is selling all of the receivers it can produce to outside customers. Also assume that $13 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 Stibbins Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver. Data concerning that receiver appear below:
  The company has a Industrial Products Division that could use this receiver in one of its products. The Industrial Products Division is currently purchasing 6,000 of these receivers per year from an overseas supplier at a cost of $79 per receiver.
Required:
a. Assume that the Receiver Division is selling all of the receivers it can produce to outside customers. What is the acceptable range, if any, for the transfer price between the two divisions?
b. Assume again that the Receiver Division is selling all of the receivers it can produce to outside customers. Also assume that $13 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?