Materials Used by Ford Company in Producing Division A's Product $\$ 25$

question 13

Essay

Materials used by Ford Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division
B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.
(a)If a tranfer price of $\$ 25$ per unit is established and 60,000 units of material are transferred with no reductions in Division $B^{\prime}$ s curent sales, how much wou'd Ford Company's tot al income from operations increase?

(b)How much would the income from operations of Division A increase?
(c)How much would the income from operations of Division B increase?
(d)If the negotiated price approach is used, what would be the range of accept able tranffer prices?

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Definitions:

Phenol

An aromatic organic compound with the molecular formula C6H5OH, noted for its antiseptic properties.

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A field of chemistry dedicated to the application of chemical principles and techniques to the justice system.

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A characteristic of molecules where an uneven distribution of electrons creates regions of positive and negative charges, influencing how molecules interact.

Solvent Interaction

The process by which a solvent can dissolve solute particles, involving physical and chemical interactions.