Gil Jargon Corporation Makes Lawn Mowers

question 167

Short Answer

Gil Jargon Corporation makes lawn mowers.The Battery division makes a battery that the Electric Motor division needs for a new product.The Battery division's variable cost of manufacturing the battery is $16 per
a.If the Battery Division has adequate excess capacity to supply the 50,000 batteries what is the minimum transfer price?
b.If the Battery Division has adequate excess capacity to supply the 50,000 batteries,what is the range of prices that is likely to be acceptable to both the Battery division and the Electric Motor division?

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Definitions:

Income Statement

A financial report detailing a company's incomes, costs, and net earnings during a defined timeframe.

Contribution Margin

The amount by which a product's selling price exceeds its total variable costs, contributing towards covering fixed expenses and generating profit.

Unit

A single, distinct item or entity that is a part of a larger group, system, or measure.

Break-Even Point

The point where the amount of goods produced or sold matches the total costs, leading to neither profit nor loss.