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:

Collective Agreement

A written contract negotiated between an employer and a union representing the employees, outlining terms of employment, salaries, and conditions.

Grievance Handling

The process of addressing complaints raised by employees regarding workplace issues, policies, or interpersonal conflicts.

Supervisors

Supervisors are individuals in an organization responsible for managing staff, overseeing work performance, and ensuring the execution of tasks and projects.

Arbitrator's Responsibility

The duty of an impartial third party to make a decision in a dispute between two parties, based on evidence and arguments presented.