What will be the likely range of the transfer prices

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Reference no: EM132593777

                                                             J Div                             M DIv

Annual max capacity (unit)                        100,000 units         60,000 units

Annual sales volume (units)

External sales                                              60,000 units        48,000 units

Transfer sales (to M Div)                                  48,000 units               -

unit selling price (external)                                     $400                   $1,000

Unit variable manufacturing costs                             $300                        $310 (exclude cost of material from J Div)

Annual fixed overheads                                             $5,000,000             $6,000,000

M Div can buy from external supplier (similar material from J Div) at $350 per unit.

Question 1: If J Div was granted autonomy to set the transfer price, what will be the likely range of the transfer prices? Recommend the transfer prices that will maximize the profits of the company as a whole.

Reference no: EM132593777

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