Sandy Company Has Two Divisions,Huron and Cortez

question 118

Essay

Sandy Company has two divisions,Huron and Cortez.Huron produces an item that Cortez could use in its production.Cortez currently is purchasing 50,000 units from an outside supplier for $24 per unit.Huron is currently operating at full capacity of 600,000 units and has variable costs of $13.50 per unit.The full cost to manufacture the unit is $19.50.Huron currently sells 600,000 units at a selling price of $25.50 per unit.
a.What will be the effect on Sandy Company's operating profit if the transfer is made internally?
b.What is the minimum transfer price from Huron's perspective?
c.What is the maximum transfer price from Cortez' perspective?

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Definitions:

Microorganisms

Microscopic entities, including bacteria and viruses, that may cause infectious diseases but also play essential roles in ecosystems.

Ictotest

A diagnostic test used specifically for detecting the presence of bilirubin in urine, which can indicate liver damage or disease.

Bilirubin

A yellow breakdown product of normal heme catabolism. Its levels are elevated in certain diseases, and it is responsible for the yellow color of bruises and the brown color of feces.

Ammonia

A colorless gas with a distinct sharp smell, commonly used in cleaning products and as a fertilizer, and also produced naturally in the human body.