Solution-Should the transfer take place

Should the transfer take place

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Reference no: EM132620409

Alberta Revolting Industries has two divisions: Complaining and Separating. The Complaining Division is looking to source 40,000 units annually of the Revolter from Separating. The Revolter has variable costs of $300 per unit in variable production costs. The Machine Products Division has a bid from an outside supplier of $545 per unit. However, to meet the requirements of the Separating Division, Complaining would have to cut back production of an existing product. This product sells for $565 per unit and requires $369 per unit in variable production costs. Packaging and shipping costs of the existing product are $50 per unit, but these would be slashed by 55% for the Revolter for Separating. Complaining currently sells 220,000 units of the existing product and this volume would have to be reduced by 45% to meet the Separating Division's demand.

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Problem a. Should the transfer take place, and if so, what would be the range of acceptable transfer prices?

Reference no: EM132620409

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Should the transfer take place

Reference no: EM132620409

Reference no: EM132620409

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