What should be the minimum transfer price accepted by

Reference no: EM13580018

rede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10.03 from an outside vendor. Division A needs 10,300 lamps for the coming year. Division B has the capacity to manufacture 50,000 lamps annually. Sales to outside customers are estimated at 39,700 lamps for the next year. Reading lamps are sold at $12.44 each. Variable costs are $6.70 per lamp and include $1.15 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $79,400. Consider the following independent situations.

What should be the minimum transfer price accepted by Division B for the 10,300 lamps and the maximum transfer price paid by Division A

If Division A needs 14,300 lamps instead of 10,300 during the next year, what should be the minimum transfer price accepted by Division B and the maximum transfer price paid by Division A

Reference no: EM13580018

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