Gil Jargon Corporation produces lawn mowers.The Battery division makes a battery that the Electric Motor division needs for a new product.The Battery division's variable cost of manufacturing the battery is $16 per unit.The battery is also available on the open market at a price of $21 per unit.The Electric Motor division needs 50,000 batteries per year.
Required:
a.If the Battery Division has adequate excess capacity to supply the 50,000 batteries, what is the minimum transfer price?
b.If the Battery Division has adequate excess capacity to supply the 50,000 batteries, what is the range of prices that is likely to be acceptable to both the Battery division and the Electric Motor division?

Question

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The Answer of Gil Jargon Corporation produces lawn mowers.The Battery division makes a battery that the Electric Motor division needs for a new product.The Battery division's variable cost of manufacturing the battery is $16 per unit.The battery is also available on the open market at a price of $21 per unit.The Electric Motor division needs 50,000 batteries per year.
Required:
a.If the Battery Division has adequate excess capacity to supply the 50,000 batteries, what is the minimum transfer price?
b.If the Battery Division has adequate excess capacity to supply the 50,000 batteries, what is the range of prices that is likely to be acceptable to both the Battery division and the Electric Motor division?

Gil Jargon Corporation Produces Lawn Mowers