Reference no: EM132516345

The editing services are incorporated into the publication process for authors who publish with your firm. However an external market continues exists for editing for other authors and publishers. Market price has been used as the transfer price into printing for the editing services and the following costs and prices are available for printing a Small Book.

Average market price for final print publication Small $120 Book

Average market price for editing 90

Average variable costs of editing 60

Average variable cost to complete printing of publication 40

Suppose that Editing has the choice of:

1. Cutting the external editing price to $75 which would guarantee editing sales of 100 units per month, or
2. Maintain the current position whereby the external price of $90 is applied for the 40 units sold externally per month and the remaining time is devoted to work for Printing.

Question 1: Which option should be chosen?

Question 2: What are considerations should management factor into the decision making process?