Spirit Manufacturing is a division of Birch Communications, Inc. Spirit produces cell phones and sells these phones to other communication companies, as well as to Birch. Recently, the vice president of marketing for Birch approached Spirit with a request to make 20,000 units of a special cell phone that could be used anywhere in the world. The following information is available regarding the Spirit division:
Instructions
Calculate the minimum transfer price and indicate whether the internal transfer should occur for each of the following:
1. The marketing vice president offers to pay Spirit $110 per phone. Spirit has available capacity.
2. The marketing vice president offers to pay Spirit $110 per phone. Spirit has no available capacity and would have to forgo sales of 20,000 phones to existing customers to meet this request.
3. The marketing vice president offers to pay Spirit $175 per phone. Spirit has no available capacity and would have to forgo sales of 30,000 phones to existing customers to meet this request.

Question

Spirit Manufacturing is a division of Birch Communications, Inc. Spirit produces cell phones and sells these phones to other communication companies, as well as to Birch. Recently, the vice president of marketing for Birch approached Spirit with a request to make 20,000 units of a special cell phone that could be used anywhere in the world. The following information is available regarding the Spirit division:  
Instructions
Calculate the minimum transfer price and indicate whether the internal transfer should occur for each of the following:
1. The marketing vice president offers to pay Spirit $110 per phone. Spirit has available capacity.
2. The marketing vice president offers to pay Spirit $110 per phone. Spirit has no available capacity and would have to forgo sales of 20,000 phones to existing customers to meet this request.
3. The marketing vice president offers to pay Spirit $175 per phone. Spirit has no available capacity and would have to forgo sales of 30,000 phones to existing customers to meet this request.

Quizplus · Accepted Answer

The Answer of Spirit Manufacturing is a division of Birch Communications, Inc. Spirit produces cell phones and sells these phones to other communication companies, as well as to Birch. Recently, the vice president of marketing for Birch approached Spirit with a request to make 20,000 units of a special cell phone that could be used anywhere in the world. The following information is available regarding the Spirit division:  
Instructions
Calculate the minimum transfer price and indicate whether the internal transfer should occur for each of the following:
1. The marketing vice president offers to pay Spirit $110 per phone. Spirit has available capacity.
2. The marketing vice president offers to pay Spirit $110 per phone. Spirit has no available capacity and would have to forgo sales of 20,000 phones to existing customers to meet this request.
3. The marketing vice president offers to pay Spirit $175 per phone. Spirit has no available capacity and would have to forgo sales of 30,000 phones to existing customers to meet this request.

Spirit Manufacturing Is a Division of Birch Communications, Inc