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Kessler Enterprises manufactures computer monitors in its Video Division

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Question;Kessler;Enterprises manufactures computer monitors in its Video Division. These;monitors can be sold internally to the EDD Division of Kessler or externally to;independent customers. Sales and costs for the most popular monitor;manufactured by the Video Division are as follows.;Per unit Selling Price $135;Per unit Variable Cost $102;Per unit Fixed Cost;[based on full;production capacity] $;28;Full monthly production;capacity 10,000 units;A. The Video Division of Kessler plans to sell;96,000 of these monitors to outside customers in the coming year. The EDD;Division of Kessler needs and has been buying 20,000 identical monitors per;year from an outside supplier at a price of $135.;What is the minimum transfer price for;the monitor that the Video Division should be willing to accept on an;internal transfer?;What is the maximum transfer price the;EDD Division should be willing to pay for these monitors?;If the two divisions agree to a;transfer price of $125 per monitor, calculate the effect on each;division?s net income for the year.;B. Now assume the Video Division of Kessler;plans to sell 115,000 of these monitors to outside customers in the coming;year. The EDD Division needs and has been buying 20,000 identical monitors per;year from an outside supplier at a price of $135. The Video Division can;eliminate $12 per monitor of variable costs on any transfers to the EDD;Division because no sales commissions will be paid on any monitors sold to the;EDD Division.;If the two divisions agree to a;transfer price of $120 per monitor, calculate the effect on each;division?s net income for the year.;What is the minimum transfer price for;the monitor that the Video Division should be willing to accept on an;internal transfer?;C. List at least three qualitative;factors that should be considered when deciding whether the Video Division;should sell computer monitors to the EDD Division of Kessler Enterprises.

 

Paper#44008 | Written in 18-Jul-2015

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