Reference no: EM13572624

Better Banjos is a small manufacturing company located in Southern Arkansas. They specialize in producing high quality banjos (stringed musical instruments similar to violins, guitars, or fiddles) that are desired by blue grass music players all over the United States. Better Banjos is composed of two manufacturing departments that are both evaluated as profit centers. One manufacturing division produces strings and tuning pegs (little knob the tunes a string when turned). The other manufacturing division produces the wooden bodies from high quality mahogany and rosewood. After the strings and tuning pegs are produced in division

A, they are shipped to Division B and are added to the wooden bodies to complete the banjos - the two plants are on the same facilities so the shipping charges are ignored. In addition to being used for the banjos produced in Division B, the strings and tuning pegs can also be used for guitars and other stringed instruments produced by other companies. In fact, about 33% of Division A's income comes from sales made to other companies. In the same sense that Division A is able to sell its product to other outlets than Division B, Division B is able to purchase strings and tuning pegs from other sources. Thus, each division is not 100% dependent upon the other division and instead, is capable of operating in some fashion in the absence of the other division. Division A's cost information is reported in the table below.