The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry childrenor cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturingcosts. The Trailer division has capacity for 40,000 trailers per year and incurs fixed costs of $1,000,000per year. Assume the Trailer division currently only sells 20,000 Trailers to outside customers, and the Assembly division wants to buy 15,000 trailers per year from the Trailer division. What is the range of acceptable prices that could be used on transfers between Baxter Bicycles’s divisions? Explain.
The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry childrenor cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturingcosts. The Trailer division has capacity for 40,000 trailers per year and incurs fixed costs of $1,000,000per year. Assume the Trailer division currently only sells 20,000 Trailers to outside customers, and the Assembly division wants to buy 15,000 trailers per year from the Trailer division. What is the range of acceptable prices that could be used on transfers between Baxter Bicycles’s divisions? Explain.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 9EA: Brahma Industries sells vinyl replacement windows to home improvement retailers nationwide. The...
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The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children
or cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable
costs.
per year. Assume the Trailer division currently only sells 20,000 Trailers to outside customers, and the
Assembly division wants to buy 15,000 trailers per year from the Trailer division. What is the range of
acceptable prices that could be used on transfers between Baxter Bicycles’s divisions? Explain.
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