Solution-By how much would the profit of the organisation

By how much would the profit of the organisation increase

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Reference no: EM133078226

Question - ST Performance Designs has several divisions. Its ability to manufacture most of its car components in-house allows for a great degree of integration within the vehicle, ensuring a highly reliable and refined product.

The crash technology department buys 35,000 tactical airbags from the tactibag manufacturing division. The tactibag division's variable costs for manufacturing the airbags are $258 per unit. The variable selling cost for external sales is $85 per unit, because they need to be modified to fit regular vehicles. The tactibag division is currently working at 100 % of capacity (max: 46,500 airbags). The current market price of the tactibags is $450 per unit (sales and purchases).

Required -

a) Determine the minimum transfer price for the tactibag division

b) Suppose the tactibag division can now sell 46 500 units on the external market.

1-Determine the minimum transfer price for the airbag division.

2- By how much would the profit of the organisation increase or decrease if there is a transfer between the two divisions compare to buying and selling externally.

Reference no: EM133078226

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By how much would the profit of the organisation increase

Reference no: EM133078226

Reference no: EM133078226

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