Zumsteg Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump. Data concerning that pump appear below:
The company has a Pool Products Division that could use this pump in one of its products. The Pool Products Division is currently purchasing 7,000 of these pumps per year from an overseas supplier at a cost of $81 per pump.
Required:
Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs. What is the acceptable range, if any, for the transfer price between the two divisions?
Definitions:
Financial Position
A snapshot of a company's assets, liabilities, and equity at a given point in time, showing its economic situation.
Statement Of Comprehensive Income
A financial statement that presents a company's total income, including both net income and other income items that are not included in the net income.
Gross Profit Ratio
A financial metric that compares gross profit to net sales, revealing the efficiency of a company in managing its labor and supplies in production.
Accounts Receivable
Customer-incurred debts to a business for goods or services for which payment is outstanding.
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