Transfer prices and divisional profits

Reference no: EM1363348

A chair manufacturer has two divisions: framing and upholstering. The framing costs are $100 per chair and the upholstering costs are $200 per chair. The company makes 5,000 chairs each year, which are sold for $500. Un-upholstered chair frames can be sold at cost to other chair manufacturers.

a) What is the minimum transfer price for this company?

b) What is the profit of each division if the transfer price is $150?

c) What is the profit of each division if the transfer price is $200?

Reference no: EM1363348

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