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The circus division of Acorn Industries produces pull-off steering wheels that can be sold to outside...

The circus division of Acorn Industries produces pull-off steering wheels that can be sold to outside customers or transferred to the Car Division of the company. The following information has been collected by Acorn's controller:

Production capacity: 100,000 units

Selling price: $60 per unit
Variable production cost: $36 per unit

Variable Selling cost: $4 per unit

Fixed Production cost: $7 per unit

Number of transformers needed by the Car Division: 6,000

If the Circus division transfers its units to the Car division, it can avoid $2 of variable selling cost.

Required:

1. What is the lowest acceptable per unit transfer price if the Circus division is currently only selling 80,000 units to outside customers?

2. What is the full cost transfer price per unit?

3. What is the range for a negotiated price?

4. If the Circus division is instead operating at capacity before considering the internal transfer, then what would an acceptable transfer price be and why?

Solutions

Expert Solution

For any queries or doubts related to format or any values please post in comment section, I would take that up instantly.

ekkarill92 answered 2 years ago
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