Reference no: EM132579576

The ...Northwest ...Division of ...Kebalo Electric.. produces ..hydroelectric ...power. The power plant has seven machines that can harvest hydroelectric power on a continuous process such that the capacity of the plant is 5,000 machine hours per month. The plant produces three types of electric power. Energy type "Standard" is not easily stored, energy type "Super" is easier to store and send to more remote regions, and energy type "Bad" has no external market. However, energy type "Bad" is easily transferred to the Southwest Division of Kebalo Electric where it can be transferred into a marketable energy source by the Southwest Division. The Southwest Division can further process the "Bad" energy at a variable cost of $1 per unit and sell it for $5 per unit. The selling price for the energy types are as follows (note: a unit of energy is a kilowatt-hour):

                                 "Super"              "Standard"            "Bad"

Selling Price/unit        6                         3.5                     --

Variable Cost/unit                2                   1                       3

Total Fixed Cost              $15,000

Machine hours/unit            0.5                  0.25                      1

The external demand for each energy source in units (kilowatt-hours) is as follows:

                                                      "Super"               "Standard"                    "Bad"

Demand in units (kilowatthours)      3,000                1,500                         --

Question:

Question 1: What is the optimal transfer pricing schedule for the Northwest Division to charge the Southwest Division for "Bad" energy? Note: there are three transfer prices at three separate intervals, please type the optimal transfer price for each interval using just whole numbers (e.g. 12).

0-3,125 units the transfer price =

3,126-4,625 units the transfer price =

4,626-5000 units the transfer price =