Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 30 Jul 2017 My Price 9.00

Daniels Inc.,

19-33    Transfer Pricing; Decision Making Daniels Inc., which manufactures sports equipment, consists of several operating divisions. Division A has decided to go outside the company to buy materials since division B informed it that the division’s selling price for the same materials would increase to

$200. Information for division A and division B follows:

 

Outside price for materials

$150

Division A’s  annual purchases

10,000 units

Division B’s variable costs per unit

$140

Division B’s fixed costs, per year

$1,250,000

Division B’s capacity utilization

100%

 

Required

1.    Will the company benefit if division A purchases outside the company? Assume that division B cannot sell its materials to outside buyers.

2.    Assume that division B can save $200,000 in fixed costs if it does not manufacture the material for divi- sion A. Should division A purchase from the outside market?

3.    Assume the situation in requirement 1. If the outside market value for the materials drops $20, should A buy from the outside? Explain.

Answers

Maurice Tutor
(5)
Status NEW Posted 30 Jul 2017 12:07 PM My Price 9.00

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