MGAB03H3 Lecture Notes - Lecture 13: Icq, Transfer Pricing, Fixed Cost
Document Summary
The bit division manufactures an electronic device and purchases a component, part x22, from the part division of the same company. The division managers have full authority on decisions involving transactions with internal or external customers and suppliers. Currently, the part division is operating at full capacity and the bit division is operating below its capacity of 5,000 units. Part x22 can be sold externally for . The costs of producing the electronic device, excluding the cost of part x22, are as follows: The manager of the bit division has received an offer from a national distributor willing to buy 500 electronic devices at a price of per unit. Required: indicate the minimum transfer price that the manager of the part division would agree to. Justify your answer: indicate the maximum transfer price that the manager of the bit division would be willing to pay for part x22.
