TK Electronics Is a Manufacturer with Two Departments: Computer Chips

question 15

Essay

TK Electronics is a manufacturer with two departments: Computer Chips and Cell Phones.The computer chip that is produced in the Chips Department can be sold to customers at $2.50 per chip.The costs associated with the computer chips are as follows:

The Cell Phone Department has been purchasing the chips that they need for $2.25 per chip from Chips R Us,but the manager was thinking that if the Chips Department could supply the chips for less than what Chips R Us is asking,then they would arrange a transfer between departments instead of giving the business to an external company.The Cell Phone Department requires 30,000 chips per period.Variable marketing and administrative expenses can be reduced by 75% if the units are transferred internally.
Required:
Prepare an analysis that demonstrates if the Chips Department should supply the chips to the Cell Phone Department.

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