Question;Question 3Division A has a pre-fabricated product that can be sold either to external customers orto Division B of the same company for use in its production process. The managers ofthe divisions are evaluated based on their divisional profits. Sales and cost data on theproduct are as follow:Selling price per unit on the market $30Variable costs per unit $21Fixed costs per unit (based on production capacity) $4Production capacity in units per month 7,500Division B needs 1,000 units of the product from Division A per month. It has receiveda quote of $24 from another manufacturer. Division A is now selling 6,000 units of theproduct to external customers per month.(a) From the standpoint of Division A, calculate the highest and lowest acceptabletransfer price for the product to be sold to Division B.(5 marks)(b) From the standpoint of Division B, calculate the highest and lowest acceptabletransfer price for the product to be acquired from Division A.(4 marks)(c) If both division managers are given autonomy in decision-making, will theproduct be transferred from Division A to Division B? Explain your answerwith figures.(6 marks)(d) Assuming now that external demand for the product exceeds the productioncapacity and Division A is able to sell all the products to external customers. Ifboth managers are given autonomy in decision-making, will the product betransferred from Division A to Division B? Explain your answer with figures.(4 marks)(e) Briefly describe the organisation where you are working at or one that you arefamiliar with.Give an example of a good or service that can be transferred from one divisionof the organisation to another.
Paper#39158 | Written in 18-Jul-2015Price : $22