Trendell Products, Incorporated, has a Motor Division that manufactures and sells a number of products, including a standard motor. Data concerning that motor appear below:
The company has a Automotive Division that could use this motor in one of its products. The Automotive Division is currently purchasing 8,000 of these motors per year from an overseas supplier at a cost of $66 per motor.
Required:
Assume that the Motor Division has enough idle capacity to handle all of the Automotive Division's needs.
What is the acceptable range, if any, for the transfer price between the two divisions?

Question

Trendell Products, Incorporated, has a Motor Division that manufactures and sells a number of products, including a standard motor. Data concerning that motor appear below:
  The company has a Automotive Division that could use this motor in one of its products. The Automotive Division is currently purchasing 8,000 of these motors per year from an overseas supplier at a cost of $66 per motor.
Required:
Assume that the Motor Division has enough idle capacity to handle all of the Automotive Division's needs.
What is the acceptable range, if any, for the transfer price between the two divisions?

Quizplus · Accepted Answer

The Answer of Trendell Products, Incorporated, has a Motor Division that manufactures and sells a number of products, including a standard motor. Data concerning that motor appear below:
  The company has a Automotive Division that could use this motor in one of its products. The Automotive Division is currently purchasing 8,000 of these motors per year from an overseas supplier at a cost of $66 per motor.
Required:
Assume that the Motor Division has enough idle capacity to handle all of the Automotive Division's needs.
What is the acceptable range, if any, for the transfer price between the two divisions?

Trendell Products, Incorporated, Has a Motor Division That Manufactures and Sells