Castle Homes Corporation
The Carpet Division of Castle Homes Corporation manufactures a single grade of residential grade carpeting.The division has the capacity to produce 500,000 square yards of carpet each year.Its current costs and revenues are shown here:
Sales (400,000 square yards) $\$ 2,000,000$
Variable costs per square yard:
Production $ \$ 2.00 $
SG&A 1.00
Fixed costs per square yard (based on 500,000 yard capacity)
Production $ \$ 0.50 $
SG&A 1.00

The Housing Division currently purchases 40,000 yards of carpeting (of the grade produced by the Carpet Division)each year at a cost of $6.50 per square yard from an outside vendor.
Refer to Castle Homes Corporation.If the autonomous Housing and Carpet Divisions enter negotiations on the internal transfer of 40,000 square yards of carpeting,what is the maximum price that will be considered?

Question

Castle Homes Corporation
The Carpet Division of Castle Homes Corporation manufactures a single grade of residential grade carpeting.The division has the capacity to produce 500,000 square yards of carpet each year.Its current costs and revenues are shown here:
 Sales (400,000 square yards)                                $\$ 2,000,000$
Variable costs per square yard:
Production                                                             $ \$ 2.00 $
SG&A                                                                      1.00
Fixed costs per square yard (based on 500,000 yard capacity)
 Production                                                              $ \$ 0.50 $
SG&A                                                                      1.00
 
The Housing Division currently purchases 40,000 yards of carpeting (of the grade produced by the Carpet Division)each year at a cost of $6.50 per square yard from an outside vendor.
Refer to Castle Homes Corporation.If the autonomous Housing and Carpet Divisions enter negotiations on the internal transfer of 40,000 square yards of carpeting,what is the maximum price that will be considered?

Quizplus · Accepted Answer

The Answer of Castle Homes Corporation
The Carpet Division of Castle Homes Corporation manufactures a single grade of residential grade carpeting.The division has the capacity to produce 500,000 square yards of carpet each year.Its current costs and revenues are shown here:
 Sales (400,000 square yards)                                $\$ 2,000,000$
Variable costs per square yard:
Production                                                             $ \$ 2.00 $
SG&A                                                                      1.00
Fixed costs per square yard (based on 500,000 yard capacity)
 Production                                                              $ \$ 0.50 $
SG&A                                                                      1.00
 
The Housing Division currently purchases 40,000 yards of carpeting (of the grade produced by the Carpet Division)each year at a cost of $6.50 per square yard from an outside vendor.
Refer to Castle Homes Corporation.If the autonomous Housing and Carpet Divisions enter negotiations on the internal transfer of 40,000 square yards of carpeting,what is the maximum price that will be considered?

Castle Homes Corporation the Carpet Division of Castle Homes Corporation $2,000,000\$ 2,000,000$2,000,000

Castle Homes Corporation
the Carpet Division of Castle Homes Corporation $\$ 2,000,000$