Bradford Manufacturing Ltd

question 168

Essay

Bradford Manufacturing Ltd.manufactures custom metal perforating and fabricating.Its Fabricating Division can transfer the perforated metal components to Bradford's Automotive Division or it can sell its products on the external market.Fabricating currently produces and sells 350,000 units per year to the external market at an average price of $38 per unit.Variable costs of production average $22.50 and fixed costs of $6.50/unit.Fabricating incurs $2.50 of variable selling costs on external sales.Fixed costs are based on the practical capacity of the plant which is 400,000 per year.The Automotive Division is interested in acquiring up to 50,000 units per year.Required:
a.From the standpoint of Bradford Manufacturing Ltd., should the units be transferred? Determine the financial benefit or cost of your recommendation.
b.Using the general guidelines for transfer pricing, what is the minimum transfer price Fabricating should accept?
c.What is the range of acceptable transfer prices?
d.Now assume that demand in the external market for the components is expected to increase by 8%.The Automotive Division has negotiated with an external supplier to supply 50,000 units at a price of $34.50/unit.However, if the Automotive Division reduces its volume below the 50,000 unit volume, it must pay $39 per unit.What is the optimum sourcing arrangement for the company?
1)Source all 50,000 components externally.2)Source all 50,000 components internally.3)Transfer the excess capacity of 22,000 and outsource the remaining required 28,000 externally.

Identify the conditions under which buyers and sellers have the right to reject, revoke acceptance, or demand performance of contracts.

Describe the perfect tender rule and its exceptions.

Analyze the obligations of contractual parties as determined by common law and the UCC.

Develop an understanding of the remedies available for breach of contract under the UCC.

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Definitions:

Visible Minorities

Individuals from racial or ethnic groups that are not in the majority within a specific community or country, often marked by visible differences.

Labour Shortages

A situation in which there are insufficient qualified candidates available to fill the positions needed by employers in the labor market.

Employee Engagement

The emotional commitment an employee has to their organization and its goals, resulting in the use of discretionary effort in their work.

Psychological Capital

A concept in positive organizational behavior characterized by an individual's positive psychological state of development, evidenced by self-efficacy, optimism, hope, and resilience.