Halber Industries Is a Decentralized Company That Evaluates Its Divisions

question 4

Essay

Halber Industries is a decentralized company that evaluates its divisions based on ROI. The Brock Division has the capacity to make 2,000 units of a component. The Brock Division's variable costs are £80 per unit.
The Cliff Division can use the Brock component in the manufacturing of one of its own products. The Cliff Division would incur £60 of variable costs to convert the component into its own product, which sells for £300.
a.Assume the Brock Division can sell all of the components that it produces for £180 each. The Cliff Division needs 100 units. What is the correct transfer price?
b.Assume the Brock Division can sell 1,800 units at £260. Any excess capacity will be unused unless the units are purchased by the Cliff Division, which could use up to 100 units.Determine the minimum transfer price that the Brock Division would be willing to accept.Determine the maximum transfer price that the Cliff Division would be willing to pay.

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Definitions:

A Register

An A register, often referred to in the context of assembly language and computer architecture, typically stands for an accumulator register, used in arithmetic and logic operations.

Storage Class

A classification in programming that determines the lifetime and scope of variables or functions.

Local Variables

Variables that are declared inside a function or block and can only be accessed within that function or block.