Calculate the incremental income of each division

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Question - Denver Company is a Manufacturing company that currently operates with two divisions: Dog and Den. The Den division currently manufactures a product that the Dog division purchases from an outside supplier. The Dog division needs 70,000 units each year, and pays the outside supplier $70 per unit Den division's variable manufacturing cost is $45 per unit and has the capacity to manufacture 95.000 units per year. Currently Den has only produces and sells 60.000 units per year at a selling price of $86 per unit.

Required -

A) Calculate the minimum and maximum transfer prices.

B) Assume that the managers of both divisions agree on a transfer price of $68 per unit. Calculate the incremental income of each division if a transfer of 70.000 units is done?

Reference no: EM133164037

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