Question

Little Goose Products, Inc., has a Parts Division that manufactures and sells a number of products, including a beak that could be used by another division in the company, the Stuffed Animal Division, in one of its products. Data concerning that beak appear below:

Parts Division
Capacity in Units	50,000
Selling Price to outside customers	$50
Variable cost per unit	$34
Fixed cost per unit (based on capacity)	$5

The Stuffed Animal Division is currently purchasing 12,000 of these beaks per year from an overseas supplier at a cost of $48 per beak.

Assume that the Parts Division is currently only able to sell 35,000 beaks a year. There is no savings in selling within the company.   The minimum acceptable transfer price (per unit) from the standpoint of the Parts Division is a. 34, b.50, c.48, d.39

. The maximum acceptable transfer price (per unit) for the beaks from the standpoint of the Stuffed Animal Division is a.48, b.45, c.50, d.30, e.34

If a transfer price is set at $45, the Parts Division's net income will a.increase, b.decrease

by a.132,000, b.60,000, c.72,000, d.some amount other than those shown and the Stuffed Animal Division's net income will increase by a.36,000, b.132,000, c.72000, d.some amount other than those shown

Answer 1

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