S Inc. has two divisions Alpha division and beta division . Alpha is selling a unit at $ 60. It's full manufacturing cost is $ 40 per unit. The final product of Alpha division is one of the products used by beta division . Beta division can buy the product from outside market at $ 55 per unit. However, since alpha division has available spare capacity to fulfil the requirements of beta division , the divisions have decided to opt for inter-divisional transfer. The manager of both divisions are negotiating over the transfer price . What maximum transfer price will the manager of beta division accept ?
S Inc. has two divisions Alpha division and beta division . Alpha is selling a unit at $ 60. It's full manufacturing cost is $ 40 per unit. The final product of Alpha division is one of the products used by beta division . Beta division can buy the product from outside market at $ 55 per unit. However, since alpha division has available spare capacity to fulfil the requirements of beta division , the divisions have decided to opt for inter-divisional transfer. The manager of both divisions are negotiating over the transfer price . What maximum transfer price will the manager of beta division accept ?
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
Problem 16BEA
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S Inc. has two divisions Alpha division and beta division . Alpha is selling a unit at $ 60. It's full manufacturing cost is $ 40 per unit. The final product of Alpha division is one of the products used by beta division . Beta division can buy the product from outside market at $ 55 per unit. However, since alpha division has available spare capacity to fulfil the requirements of beta division , the divisions have decided to opt for inter-divisional transfer. The manager of both divisions are negotiating over the transfer price . What maximum transfer price will the manager of beta division accept ?
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