Crickmore Industries has two divisions, the D division and the J division. Information about a component that the D division produces is as follows: The D division can produce up to 8,000 components per year. The J division needs 500 units of the component for a product it manufactures.
a. Determine the minimum transfer price that the D division would accept.
b. Determine the maximum transfer price that the manager of the J division would pay.
c. How would your answers to requirements [A] and [B] above, change if the D division did not have excess capacity?

Question

Crickmore Industries has two divisions, the D division and the J division. Information about a component that the D division produces is as follows:  The D division can produce up to 8,000 components per year. The J division needs 500 units of the component for a product it manufactures.
a. Determine the minimum transfer price that the D division would accept.
b. Determine the maximum transfer price that the manager of the J division would pay.
c. How would your answers to requirements [A] and [B] above, change if the D division did not have excess capacity?

Quizplus · Accepted Answer

The Answer of Crickmore Industries has two divisions, the D division and the J division. Information about a component that the D division produces is as follows:  The D division can produce up to 8,000 components per year. The J division needs 500 units of the component for a product it manufactures.
a. Determine the minimum transfer price that the D division would accept.
b. Determine the maximum transfer price that the manager of the J division would pay.
c. How would your answers to requirements [A] and [B] above, change if the D division did not have excess capacity?

Crickmore Industries Has Two Divisions, the D Division and the J