What is the minimum transfer price from polk perspective

Assignment Help Financial Management

Reference no: EM131551003

Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing 25,000 units from an outside supplier for $16 per unit. Polk is currently operating at less than its full capacity of 610,000 units and has variable costs of $6 per unit. The full cost to manufacture the unit is $11. Polk currently sells 440,000 units at a selling price of $20 per unit.

a. What will be the effect on Avery Company’s operating profit if the transfer is made internally?

b. What is the minimum transfer price from Polk’s perspective?

c. What is the maximum transfer price from Bishop’s perspective?

Reference no: EM131551003

Questions Cloud

Walter after-tax cost of debt : The firm's marginal tax rate is 32%. Walter's after-tax cost of debt is ____%.

Odd dividend policy-how much will you pay for a share today : Bucksnort, Inc., has an odd dividend policy. If you require a return of 12 percent on the company’s stock, how much will you pay for a share today?

What is projected dividend for the coming year : Synovec Corp. is experiencing rapid growth. What is the projected dividend for the coming year?

How much does a share of preferred stock cost today : Fifth National Bank just issued some new preferred stock. how much does a share of preferred stock cost today?

What is the minimum transfer price from polk perspective : What will be the effect on Avery Company’s operating profit if the transfer is made internally? What is the minimum transfer price from Polk’s perspective?

Rabbit transportation inc is considering project : Suppose Green Rabbit Transportation Inc. is considering a project that will require $350,000 in assets. The company incurs a tax rate of 30%.

Company using the fama-french three-factor model : An analyst has modeled the stock of a company using the Fama-French three-factor model.

What would be the company new cost of equity : What would be the company's new cost of equity if it adopted the proposed change in capital structure?

Zero-coupon bonds to be immunized against the liability : Company XYZ has a liability of $60,000 that is due in 3 years. The company could invest in zero-coupon bonds to be immunized against the liability.

User Account

All Pages