Reference no: EM132965584

Question - A T-shirt business has two divisions, Maker and Retailer. The division Maker produces Tshirts and sells them to the division Retailer, which sells each shirt to the end-customers. You are provided the following information. Retailer's sales price to customer: $50 per unit (shirt) Maker's variable cost: $15 per unit Retailer's variable cost of sales commissions: $10 per unit Volume per year: 60,000 units (note: that is, for each year, Maker sells 60,000 shirts to Retailer; then Retailer sells these 60,000 shirts to customers) Fixed costs for Marker: $70,000 per year Fixed costs for Retailer $50,000 per year.

Required -

(1) Calculate the divisional profits for Maker and Retailer respectively; try two different prices that Maker sells Retailer the shirts. Price 1: $30 per shirt; Price 2: $16 per shirt.

(2) Comment on the calculation results.