Chesley Products,Inc

question 63

Essay

Chesley Products,Inc.,has a Connector Division that manufactures and sells a number of products,including a standard connector.Data concerning that connector appear below:
The company has a Transmission Division that could use this connector in one of its products.The Transmission Division is currently purchasing 8,000 of these connectors per year from an overseas supplier at a cost of $82 per connector.
Required:
a.Assume that the Connector Division has enough idle capacity to handle all of the Transmission Division's needs.What is the acceptable range,if any,for the transfer price between the two divisions?
b.Assume that the Connector Division is selling all of the connectors it can produce to outside customers.What is the acceptable range,if any,for the transfer price between the two divisions?
c.Assume again that the Connector Division is selling all of the connectors it can produce to outside customers.Also assume that $3 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:

Drug Enslavement Theory

A concept that suggests individuals become 'enslaved' or dependent on drugs due to the drugs' addictive properties and the social and psychological factors that reinforce usage.

General Deviance Syndrome

A hypothetical construct suggesting that various forms of deviant behavior are interconnected and stem from common risk factors.

Life of Crime

A pattern of behavior characterized by continual involvement in illegal activities.

Negative Effects

Unfavorable or harmful outcomes resulting from an event, action, or condition, impacting individuals or wider communities.