52.
Division X of Operandi Corporation makes and sells a single product which is used by
manufacturers of fork lift trucks. Presently it sells 12,000 units per year to outside
customers at $24 per unit. The annual capacity is 20,000 units and the variable cost to
make each unit is $16. Division Y of Operandi Corporation would like to buy 10,000 units a
year from Division X to use in its products. There would be no cost savings from
transferring the units within the company rather than selling them on the outside market.
What should be the lowest acceptable transfer price from the perspective of Division X?
53.
54.
55.
In general, if a potential transfer has no effect on divisional profits:
56.
An intermediate market is perfect when:
57.
When there is no intermediate market:
58.
The general principle on setting transfer prices that are in the organization’s best interests
is:
59.
If the selling division has excess capacity, the transfer price should be set at its:
60.
transfer price, assuming all relevant information is readily available?
61.
The optimal transfer price when there are intermediate markets is:
62.
63.
Division A has variable manufacturing costs of $25 per unit and fixed costs of $5 per unit.
Division A is operating at capacity, what is the opportunity cost of an internal transfer
when the market price is $35?
64.
Lock Division of Morgantown Corp. sells 80,000 units of part Z-25 to the outside market.
Part Z-25 sells for $40, has a variable cost of $22, and a fixed cost per unit of $10. The
Lock Division has a capacity to produce 100,000 units per period. The Cabinet Division
currently purchases 10,000 units of part Z-25 from the Lock Division for $40. The Cabinet
Division has been approached by an outside supplier willing to supply the parts for $36.
What is the effect on Morgantown’s overall profit if the Lock Division refuses the outside
price and the Cabinet Division decides to buy outside?
65.
66.
67.
You have been provided with the following information for the Wool Division of a
decentralized company:
Selling price
$45
Variable cost per unit
33
Fixed cost per unit
12
Sales volume (units)
22,500
Capacity (units)
25,000
68.
Given the following data for Keyboard Division:
Selling price to outside customers
$25
Variable cost per unit
12
Fixed cost – Total
50,000
Capacity (in units)
125,000
The Computer Division would like to purchase 15,000 units each period from the Keyboard
Division. The Keyboard Division has ample excess capacity to handle all of the Computer
Division’s needs. The Computer Division now purchases from an outside supplier at a
price of $20. If the Keyboard Division refuses to accept an $18 price internally, the
company, as a whole, will be worse off by:
69.
Given the following data for Electrical Cord Division:
Selling price to outside customers
$40
Variable cost per unit
30
Fixed cost – Total
10,000
Capacity (in units)
2,000
70.
Given the following data for Handle Division:
Selling price to outside customers
$150
Variable cost per unit
80
Fixed cost per unit (based on capacity)
30
Capacity (in units)
50,000
71.
15–57
72.
73.
74.
75.