Stibbins Products, Incorporated, Has a Receiver Division That Manufactures and Sells

question 93

Essay

Stibbins Products, Incorporated, has a Receiver Division that manufactures and sells a number of products, including a standard receiver. Data concerning that receiver appear below:
The company has a Industrial Products Division that could use this receiver in one of its products. The Industrial Products Division is currently purchasing 6,000 of these receivers per year from an overseas supplier at a cost of $79 per receiver.
Required:
a. Assume that the Receiver Division is selling all of the receivers it can produce to outside customers. What is the acceptable range, if any, for the transfer price between the two divisions?
b. Assume again that the Receiver Division is selling all of the receivers it can produce to outside customers. Also assume that $13 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions?

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Definitions:

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The native language spoken by one's mother, often the first language a child is exposed to and learns.

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The production of speech-like but meaningless sounds, commonly practiced by infants as a precursor to the development of language.

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Units of time in calendars that approximate the period of the Moon's orbit around the Earth, typically involving divisions of the year into twelve parts.

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