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Ricardo Products,Inc.,has a Motor Division that manufactures and sells a number of products,including a standard motor.Data concerning that motor appear below: Ricardo Products,Inc.,has a Motor Division that manufactures and sells a number of products,including a standard motor.Data concerning that motor appear below: The Automotive Division of Ricardo Products,Inc needs 10,000 special heavy-duty motors per year.The Motor Division's variable cost to manufacture and ship this special motor would be $35 per unit.Because these special motors would requires more manufacturing resources than the standard motor,the Motor Division would have to reduce its production and sales of standard motors to outside customers from 87,000 units per year to 69,000 units per year. What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division? A) $486,000 B) $874,800 C) $1,026,000 D) $270,000 The Automotive Division of Ricardo Products,Inc needs 10,000 special heavy-duty motors per year.The Motor Division's variable cost to manufacture and ship this special motor would be $35 per unit.Because these special motors would requires more manufacturing resources than the standard motor,the Motor Division would have to reduce its production and sales of standard motors to outside customers from 87,000 units per year to 69,000 units per year. What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division?


A) $486,000
B) $874,800
C) $1,026,000
D) $270,000

E) B) and D)
F) None of the above

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(Appendix 11A) Royal Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: (Appendix 11A) Royal Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: The Transmission Division is currently purchasing 6,000 of these connectors per year from an overseas supplier at a cost of $65 per connector. -Assume that the Connector Division is selling all of the connectors it can produce to outside customers.What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division? A) $56 per unit B) $65 per unit C) $69 per unit D) $21 per unit The Transmission Division is currently purchasing 6,000 of these connectors per year from an overseas supplier at a cost of $65 per connector. -Assume that the Connector Division is selling all of the connectors it can produce to outside customers.What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?


A) $56 per unit
B) $65 per unit
C) $69 per unit
D) $21 per unit

E) A) and C)
F) B) and D)

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(Appendix 11A) Brull Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: (Appendix 11A) Brull Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: The Safety Products Division of Brull Products, Inc needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $60 per unit. Because these special sensors would requires more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 56,000 units per year to 46,400 units per year. -What is the total contribution margin on sales to outside customers that the Sensor Division would give up if it were to make the special sensors for the Safety Products Division? A) $720,000 B) $353,280 C) $220,800 D) $138,000 The Safety Products Division of Brull Products, Inc needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $60 per unit. Because these special sensors would requires more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 56,000 units per year to 46,400 units per year. -What is the total contribution margin on sales to outside customers that the Sensor Division would give up if it were to make the special sensors for the Safety Products Division?


A) $720,000
B) $353,280
C) $220,800
D) $138,000

E) All of the above
F) A) and C)

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(Appendix 11A) Yearout Products, Inc., has a Valve Division that manufactures and sells a number of products, including a standard valve that could be used by another division in the company, the Pump Division, in one of its products. Data concerning that valve appear below: (Appendix 11A) Yearout Products, Inc., has a Valve Division that manufactures and sells a number of products, including a standard valve that could be used by another division in the company, the Pump Division, in one of its products. Data concerning that valve appear below: The Pump Division is currently purchasing 9,000 of these valves per year from an overseas supplier at a cost of $53 per valve. -Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $1 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.Does there exist a transfer price that would make both the Valve and Pump Division financially better off than if the Pump Division were to continue buying its valves from the outside supplier? A) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division would accept. B) The answer cannot be determined from the information that has been provided. C) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division would accept. D) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs. The Pump Division is currently purchasing 9,000 of these valves per year from an overseas supplier at a cost of $53 per valve. -Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $1 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.Does there exist a transfer price that would make both the Valve and Pump Division financially better off than if the Pump Division were to continue buying its valves from the outside supplier?


A) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division would accept.
B) The answer cannot be determined from the information that has been provided.
C) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division would accept.
D) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs.

E) None of the above
F) C) and D)

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(Appendix 11A) Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: (Appendix 11A) Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: The Pool Products Division is currently purchasing 10,000 of these pumps per year from an overseas supplier at a cost of $94 per pump. -Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs.Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier? A) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs. B) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division would accept. C) The answer cannot be determined from the information that has been provided. D) No, the selling division's price to outside customers is higher than the price that the buying division has to pay its outside supplier. The Pool Products Division is currently purchasing 10,000 of these pumps per year from an overseas supplier at a cost of $94 per pump. -Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs.Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier?


A) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs.
B) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division would accept.
C) The answer cannot be determined from the information that has been provided.
D) No, the selling division's price to outside customers is higher than the price that the buying division has to pay its outside supplier.

E) A) and D)
F) A) and C)

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(Appendix 11A) Steinhoff Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor that could be used by another division in the company, the Safety Products Division, in one of its products. Data concerning that sensor appear below: (Appendix 11A) Steinhoff Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor that could be used by another division in the company, the Safety Products Division, in one of its products. Data concerning that sensor appear below: The Safety Products Division is currently purchasing 4,000 of these sensors per year from an overseas supplier at a cost of $48 per sensor. -What is the maximum price that the Safety Products Division should be willing to pay for sensors transferred from the Sensor Division? A) $51 per unit B) $37 per unit C) $48 per unit D) $14 per unit The Safety Products Division is currently purchasing 4,000 of these sensors per year from an overseas supplier at a cost of $48 per sensor. -What is the maximum price that the Safety Products Division should be willing to pay for sensors transferred from the Sensor Division?


A) $51 per unit
B) $37 per unit
C) $48 per unit
D) $14 per unit

E) B) and D)
F) A) and B)

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(Appendix 11A) Division A makes a part with the following characteristics: (Appendix 11A) Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each. -Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers.If Division A refuses to accept the $24 price internally and Division B continues to buy from the outside supplier,the company as a whole will be: A) worse off by $30,000 each period. B) worse off by $10,000 each period. C) better off by $15,000 each period. D) worse off by $35,000 each period. Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each. -Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers.If Division A refuses to accept the $24 price internally and Division B continues to buy from the outside supplier,the company as a whole will be:


A) worse off by $30,000 each period.
B) worse off by $10,000 each period.
C) better off by $15,000 each period.
D) worse off by $35,000 each period.

E) A) and D)
F) B) and C)

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Division G makes a part that it sells to customers outside of the company.Data concerning this part appear below: Division G makes a part that it sells to customers outside of the company.Data concerning this part appear below: Division H of the same company would like to use the part manufactured by Division G in one of its products.Division H currently purchases a similar part made by an outside company for $83 per unit and would substitute the part made by Division G.Division H requires 500 units of the part each period.Division G has ample capacity to produce the units for Division H without any increase in fixed costs and without cutting into sales to outside customers.If Division G sells to Division H rather than to outside customers,the variable cost be unit would be $2 lower.What should be the lowest acceptable transfer price from the perspective of Division G? A) $47 B) $87 C) $83 D) $57 Division H of the same company would like to use the part manufactured by Division G in one of its products.Division H currently purchases a similar part made by an outside company for $83 per unit and would substitute the part made by Division G.Division H requires 500 units of the part each period.Division G has ample capacity to produce the units for Division H without any increase in fixed costs and without cutting into sales to outside customers.If Division G sells to Division H rather than to outside customers,the variable cost be unit would be $2 lower.What should be the lowest acceptable transfer price from the perspective of Division G?


A) $47
B) $87
C) $83
D) $57

E) A) and B)
F) A) and D)

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(Appendix 11A) Division A of Tripper Company produces a part that it sells to other companies. Sales and cost data for the part follow: (Appendix 11A) Division A of Tripper Company produces a part that it sells to other companies. Sales and cost data for the part follow: Division B, another division of Tripper Company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. -Assume that Division A is presently operating at capacity.According to the formula in the text,what is the lowest acceptable transfer price from the viewpoint of the selling division? A) $37 per unit B) $39 per unit C) $36 per unit D) $38 per unit Division B, another division of Tripper Company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. -Assume that Division A is presently operating at capacity.According to the formula in the text,what is the lowest acceptable transfer price from the viewpoint of the selling division?


A) $37 per unit
B) $39 per unit
C) $36 per unit
D) $38 per unit

E) A) and C)
F) All of the above

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(Appendix 11A) Fregozo Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: (Appendix 11A) Fregozo Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: The Transmission Division is currently purchasing 8,000 of these connectors per year from an overseas supplier at a cost of $45 per connector. -Assume that the Connector Division is selling all of the connectors it can produce to outside customers.What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division? A) $54 per unit B) $45 per unit C) $41 per unit D) $20 per unit The Transmission Division is currently purchasing 8,000 of these connectors per year from an overseas supplier at a cost of $45 per connector. -Assume that the Connector Division is selling all of the connectors it can produce to outside customers.What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?


A) $54 per unit
B) $45 per unit
C) $41 per unit
D) $20 per unit

E) B) and C)
F) A) and B)

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The Southern Division of Barstol Company makes and sells a single product,which is a part used in manufacturing trucks.The annual production capacity is 12,000 units and the variable cost of each unit is $35.Presently the Southern Division sells 11,000 units per year to outside customers at $49 per unit.The Northern Division of Barstol Company would like to buy 4,000 units a year from Southern to use in its production.There would be no savings in variable costs from transferring the units internally rather than selling them externally.The lowest acceptable transfer price from the standpoint of the Southern Division should be closest to:


A) $45.50 per unit
B) $35.00 per unit
C) $32.00 per unit
D) $49.00 per unit

E) C) and D)
F) A) and B)

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Wamsley Products,Inc.,has a Transmitter Division that manufactures and sells a number of products,including a standard transmitter that could be used by another division in the company,the Remote Devices Division,in one of its products.Data concerning that transmitter appear below: Wamsley Products,Inc.,has a Transmitter Division that manufactures and sells a number of products,including a standard transmitter that could be used by another division in the company,the Remote Devices Division,in one of its products.Data concerning that transmitter appear below: The Remote Devices Division is currently purchasing 8,000 of these transmitters per year from an overseas supplier at a cost of $61 per transmitter. Assume that the Transmitter Division is selling all of the transmitters it can produce to outside customers.What should be the minimum acceptable transfer price for the transmitters from the standpoint of the Transmitter Division? A) $44 per unit B) $27 per unit C) $64 per unit D) $61 per unit The Remote Devices Division is currently purchasing 8,000 of these transmitters per year from an overseas supplier at a cost of $61 per transmitter. Assume that the Transmitter Division is selling all of the transmitters it can produce to outside customers.What should be the minimum acceptable transfer price for the transmitters from the standpoint of the Transmitter Division?


A) $44 per unit
B) $27 per unit
C) $64 per unit
D) $61 per unit

E) B) and C)
F) A) and D)

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(Appendix 11A) Fingado Products, Inc., has a Detector Division that manufactures and sells a number of products, including a standard detector that could be used by another division in the company, the Commercial Security Division, in one of its products. Data concerning that detector appear below: (Appendix 11A) Fingado Products, Inc., has a Detector Division that manufactures and sells a number of products, including a standard detector that could be used by another division in the company, the Commercial Security Division, in one of its products. Data concerning that detector appear below: The Commercial Security Division is currently purchasing 6,000 of these detectors per year from an overseas supplier at a cost of $91 per detector. -Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $6 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division? A) $92 per unit B) $77 per unit C) $91 per unit D) $98 per unit The Commercial Security Division is currently purchasing 6,000 of these detectors per year from an overseas supplier at a cost of $91 per detector. -Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $6 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?


A) $92 per unit
B) $77 per unit
C) $91 per unit
D) $98 per unit

E) B) and C)
F) B) and D)

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The transfer price used for internal transfers between divisions of the same company cannot affect the divisions' reported profits.

A) True
B) False

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(Appendix 11A) Brull Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: (Appendix 11A) Brull Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: The Safety Products Division of Brull Products, Inc needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $60 per unit. Because these special sensors would requires more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 56,000 units per year to 46,400 units per year. -From the standpoint of the Sensor Division,what is the minimal acceptable transfer price for the special sensors for the Safety Products Division? A) $75.00 per unit B) $77.00 per unit C) $83.00 per unit D) $96.80 per unit The Safety Products Division of Brull Products, Inc needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $60 per unit. Because these special sensors would requires more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 56,000 units per year to 46,400 units per year. -From the standpoint of the Sensor Division,what is the minimal acceptable transfer price for the special sensors for the Safety Products Division?


A) $75.00 per unit
B) $77.00 per unit
C) $83.00 per unit
D) $96.80 per unit

E) A) and B)
F) B) and C)

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Gauani Products,Inc.,has a Detector Division that manufactures and sells a number of products,including a standard detector.Data concerning that detector appear below: Gauani Products,Inc.,has a Detector Division that manufactures and sells a number of products,including a standard detector.Data concerning that detector appear below: The company has a Commercial Security Division that could use this detector in one of its products.The Commercial Security Division is currently purchasing 5,000 of these detectors per year from an overseas supplier at a cost of $65 per detector. Required: a.Assume that the Detector Division has enough idle capacity to handle all of the Commercial Security Division's needs.What is the acceptable range,if any,for the transfer price between the two divisions? b.Assume that the Detector Division is selling all of the detectors it can produce to outside customers.What is the acceptable range,if any,for the transfer price between the two divisions? The company has a Commercial Security Division that could use this detector in one of its products.The Commercial Security Division is currently purchasing 5,000 of these detectors per year from an overseas supplier at a cost of $65 per detector. Required: a.Assume that the Detector Division has enough idle capacity to handle all of the Commercial Security Division's needs.What is the acceptable range,if any,for the transfer price between the two divisions? b.Assume that the Detector Division is selling all of the detectors it can produce to outside customers.What is the acceptable range,if any,for the transfer price between the two divisions?

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a.From the perspective of the selling di...

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Cominsky Products,Inc.,has a Screen Division that manufactures and sells a number of products,including a standard screen.Data concerning that screen appear below: Cominsky Products,Inc.,has a Screen Division that manufactures and sells a number of products,including a standard screen.Data concerning that screen appear below: The company has a Home Security Division that could use this screen in one of its products.The Home Security Division is currently purchasing 6,000 of these screens per year from an overseas supplier at a cost of $96 per screen. Required: Assume that the Screen Division is selling all of the screens it can produce to outside customers.What is the acceptable range,if any,for the transfer price between the two divisions? The company has a Home Security Division that could use this screen in one of its products.The Home Security Division is currently purchasing 6,000 of these screens per year from an overseas supplier at a cost of $96 per screen. Required: Assume that the Screen Division is selling all of the screens it can produce to outside customers.What is the acceptable range,if any,for the transfer price between the two divisions?

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The total contribution margin on lost sa...

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(Appendix 11A) Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: (Appendix 11A) Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: The Electronics Division is currently purchasing 7,000 of these relays per year from an overseas supplier at a cost of $59 per relay. -Assume that the Relay Division is selling all of the relays it can produce to outside customers.Does there exist a transfer price that would make both the Relay and Electronics Division financially better off than if the Electronics Division were to continue buying its relays from the outside supplier? A) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division should be willing to accept. B) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division should be willing to accept. C) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs. D) The answer cannot be determined from the information that has been provided. The Electronics Division is currently purchasing 7,000 of these relays per year from an overseas supplier at a cost of $59 per relay. -Assume that the Relay Division is selling all of the relays it can produce to outside customers.Does there exist a transfer price that would make both the Relay and Electronics Division financially better off than if the Electronics Division were to continue buying its relays from the outside supplier?


A) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division should be willing to accept.
B) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division should be willing to accept.
C) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs.
D) The answer cannot be determined from the information that has been provided.

E) All of the above
F) B) and D)

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(Appendix 11A) Bacot Products, Inc., has a Valve Division that manufactures and sells a number of products, including a standard valve that could be used by another division in the company, the Pump Division, in one of its products. Data concerning that valve appear below: (Appendix 11A) Bacot Products, Inc., has a Valve Division that manufactures and sells a number of products, including a standard valve that could be used by another division in the company, the Pump Division, in one of its products. Data concerning that valve appear below: The Pump Division is currently purchasing 8,000 of these valves per year from an overseas supplier at a cost of $47 per valve. -Assume that the Valve Division is selling all of the valves it can produce to outside customers.What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division? A) $47 per unit B) $28 per unit C) $45 per unit D) $53 per unit The Pump Division is currently purchasing 8,000 of these valves per year from an overseas supplier at a cost of $47 per valve. -Assume that the Valve Division is selling all of the valves it can produce to outside customers.What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?


A) $47 per unit
B) $28 per unit
C) $45 per unit
D) $53 per unit

E) A) and B)
F) B) and C)

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Prejean Products,Inc.,has a Relay Division that manufactures and sells a number of products,including a standard relay.Data concerning that relay appear below: Prejean Products,Inc.,has a Relay Division that manufactures and sells a number of products,including a standard relay.Data concerning that relay appear below: The company has a Electronics Division that could use this relay in one of its products.The Electronics Division is currently purchasing 9,000 of these relays per year from an overseas supplier at a cost of $74 per relay. Required: a.Assume that the Relay Division has enough idle capacity to handle all of the Electronics Division's needs.What is the acceptable range,if any,for the transfer price between the two divisions? b.Assume that the Relay Division is selling all of the relays it can produce to outside customers.Also assume that $13 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.What is the acceptable range,if any,for the transfer price between the two divisions? The company has a Electronics Division that could use this relay in one of its products.The Electronics Division is currently purchasing 9,000 of these relays per year from an overseas supplier at a cost of $74 per relay. Required: a.Assume that the Relay Division has enough idle capacity to handle all of the Electronics Division's needs.What is the acceptable range,if any,for the transfer price between the two divisions? b.Assume that the Relay Division is selling all of the relays it can produce to outside customers.Also assume that $13 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.What is the acceptable range,if any,for the transfer price between the two divisions?

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a.From the perspective of the selling di...

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