Division Y Has Asked Division X of the Same Company

question 224

Essay

Division Y has asked Division X of the same company to supply it with 8,800 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $52 per unit. Division X has the capacity to produce 35,200 units of part L763 per year. Division X expects to sell 31,680 units of part L763 to outside customers this year at a price of $56.80 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $44 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y.Required:a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 8,800 parts this year from Division X to Division Y? (Round your final answers to 2 decimal places.)b. Is it in the best interests of the overall company for this transfer to take place?

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Definitions:

Labour Costs

The total amount of money that businesses need to pay to their employees, including wages, salaries, and benefits.

Unemployment Rates

The percentage of the labor force that is jobless and actively seeking employment.

Training Needs

Identification of gaps in knowledge, skills, and abilities among employees or a workforce, which can be addressed through targeted training programs.

Training Methods

Various approaches and techniques used to enhance the skills, knowledge, and abilities of employees.