The Denim Division of Jean, Inc. manufactures sweat denim jeans. The zippers used in production are presently purchased from an outside supplier at a cost of $7.00 each. A division of Jean, Inc. called the Zipper Division has just begun producing a similar zipper, which can be used by the Denim Division. Current per unit cost data for the zipper produced by the Zipper Division are as follows: Required:
a. What is the minimum transfer price that the Zipper Division should charge the Denim Division for each zipper?
b. What is the maximum transfer price that the Denim Division should be willing to pay for each zipper?

Question

The Denim Division of Jean, Inc. manufactures sweat denim jeans. The zippers used in production are presently purchased from an outside supplier at a cost of $7.00 each. A division of Jean, Inc. called the Zipper Division has just begun producing a similar zipper, which can be used by the Denim Division. Current per unit cost data for the zipper produced by the Zipper Division are as follows:  Required:
a. What is the minimum transfer price that the Zipper Division should charge the Denim Division for each zipper?
b. What is the maximum transfer price that the Denim Division should be willing to pay for each zipper?

Quizplus · Accepted Answer

The Answer of The Denim Division of Jean, Inc. manufactures sweat denim jeans. The zippers used in production are presently purchased from an outside supplier at a cost of $7.00 each. A division of Jean, Inc. called the Zipper Division has just begun producing a similar zipper, which can be used by the Denim Division. Current per unit cost data for the zipper produced by the Zipper Division are as follows:  Required:
a. What is the minimum transfer price that the Zipper Division should charge the Denim Division for each zipper?
b. What is the maximum transfer price that the Denim Division should be willing to pay for each zipper?