Belfield Corporation includes two divisions,Motor Division and Lawnmower Division.The Motor Division makes specialized motors,including one that could be used by the Lawnmower Division.Costs for the motor are: variable costs,$16;fixed costs,$20.The Motor Division has capacity to make 20,000 of the motors,and it is operating at capacity.It sells the motors to other companies for $52 each.If a sale was made to the Lawnmower Division,variable costs would be reduced by $4 per motor on those units.The Lawnmower Division needs 8,000 motors per year,and it has been purchasing them from another company for $45 each.
Required:
1)If a transfer were to occur between Motor Division and Lawnmower Division,what is the maximum that Lawnmower Division should be willing to pay for the motors?
2)If a transfer were to occur between Motor Division and Lawnmower Division,what is the minimum price that Motor Division should be willing to accept?
3)Do you recommend that a transfer occur between Motor Division and Lawnmower Division? If the transfer did occur,what would be the effect on the overall profits of Belfield Corporation?
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q106: Sanford Company reported the following information
Q107: Perfect Products provided the following selected
Q108: Car City is divided into three divisions:
Q109: Joanne Graves is manager of a
Q112: The Premium Product Company has three
Q116: Carver Company's balance sheet and income
Q122: An investment center of Lannigan Company reported
Q135: For Year 1,Division C of Deerfield Company
Q142: One of the divisions of Phoenix Corporation
Q144: Hinton Corporation includes two divisions,Filter Division and
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents