TK Electronics is a manufacturer with two departments: Computer Chips and Cell Phones. The computer chip that is produced in the Chips Department can be sold to customers at $2.50 per chip. The costs associated with the computer chips are as follows:

The Cell Phone Department has been purchasing the chips that they need for $2.25 per chip from Chips R Us, but the manager was thinking that if the Chips Department could supply the chips for less than what Chips R Us is asking, then they would arrange a transfer between departments instead of giving the business to an external company.
Required:
Prepare an analysis that demonstrates if the Chips Department should supply the chips to the Cell Phone Department.

Question

TK Electronics is a manufacturer with two departments: Computer Chips and Cell Phones. The computer chip that is produced in the Chips Department can be sold to customers at $2.50 per chip. The costs associated with the computer chips are as follows:
  
The Cell Phone Department has been purchasing the chips that they need for $2.25 per chip from Chips R Us, but the manager was thinking that if the Chips Department could supply the chips for less than what Chips R Us is asking, then they would arrange a transfer between departments instead of giving the business to an external company.
Required:
Prepare an analysis that demonstrates if the Chips Department should supply the chips to the Cell Phone Department.

Quizplus · Accepted Answer

The Answer of TK Electronics is a manufacturer with two departments: Computer Chips and Cell Phones. The computer chip that is produced in the Chips Department can be sold to customers at $2.50 per chip. The costs associated with the computer chips are as follows:
  
The Cell Phone Department has been purchasing the chips that they need for $2.25 per chip from Chips R Us, but the manager was thinking that if the Chips Department could supply the chips for less than what Chips R Us is asking, then they would arrange a transfer between departments instead of giving the business to an external company.
Required:
Prepare an analysis that demonstrates if the Chips Department should supply the chips to the Cell Phone Department.

TK Electronics Is a Manufacturer with Two Departments: Computer Chips