Compute the following :- 1. Calculate the lowest acceptable transfer price for the seller (Division A)? 2. Calculate the highest acceptable transfer price for the buyer (Division B)? 3. Calculate the range of acceptable transfer prices between the two divisions? 4. Assume Division A offers to sell 15,000 units to Division B for $74 and that Division B refuses this price. What will be the loss in potential prodits for the company whole as a whole Division A and Division B are divisions within the same company. The managers of both divisions are evaluated based on their division's return on investment (ROI).Assume the following information relative to two divisions:Division ACapacity in units160,000160,000Numbers of units now being sold to outside customersSelling price per unit to outside customersVariable costs per unit$76$46$20Fixed cost per unit (based on capacity)Division BNumber of units needed annually15,000$75Purchase price now being paid to an outside supplierA study indicates that Division A can avoid $5 per unit in shipping costs on any sales to Division B.

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 11E: The operating income and the amount of invested assets in each division of Conley Industries are as...

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Compute the following :- 1. Calculate the lowest acceptable transfer price for the seller (Division A)? 2. Calculate the highest acceptable transfer price for the buyer (Division B)? 3. Calculate the range of acceptable transfer prices between the two divisions? 4. Assume Division A offers to sell 15,000 units to Division B for $74 and that Division B refuses this price. What will be the loss in potential prodits for the company whole as a whole

Division A and Division B are divisions within the same company. The managers of both divisions are evaluated based on their division's return on investment (ROI).
Assume the following information relative to two divisions:
Division A
Capacity in units
160,000
160,000
Numbers of units now being sold to outside customers
Selling price per unit to outside customers
Variable costs per unit
$76
$46
$20
Fixed cost per unit (based on capacity)
Division B
Number of units needed annually
15,000
$75
Purchase price now being paid to an outside supplier
A study indicates that Division A can avoid $5 per unit in shipping costs on any sales to Division B.

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