Sweater Division manufactures sweaters.The buttons used in production are purchased from an outside supplier at a cost of $4.50 per sweater.The buttons can also be purchased in house from Supply Division for $4.00 per sweater.The cost data for the buttons produced by Supply Division are as follows:
Variable selling expenses are not incurred on inside transfers.Assume Supply Division has excess capacity.
Required:
A)What is the minimum transfer price that Supply Division should charge Sweater Division for the transferred buttons?
B)What is the maximum transfer price that Sweater Division should pay Supply Division for the transferred buttons?
Definitions:
Future Value
The worth of an asset or cash on a specific future date that is equal in value to a certain amount today.
Interest Rate
The proportion of the main amount that is charged by the creditor for borrowing their money, or the interest earned on funds that are deposited.
Payments
Transactions involving the transfer of money from one party to another as a form of compensation for goods, services, or obligations.
Future Value
The projected value of an investment or an asset at a specific date in the future, taking into account factors like interest rates or returns.
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