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09 Assignment

The document provides sales and cost data for speakers produced by Sako Company's Audio Division. It states the Audio Division currently has excess capacity and produces speakers for other manufacturers. It also notes the company's Hi-Fi Division needs speakers and has an outside option to purchase them for $57 each. There are 8 problems to solve based on whether the Audio Division is operating at or below capacity and determining the acceptable transfer price ranges from the perspective of each division and the company overall.

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Ahmed Ameen Nour Eldin
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© © All Rights Reserved
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35 views

09 Assignment

The document provides sales and cost data for speakers produced by Sako Company's Audio Division. It states the Audio Division currently has excess capacity and produces speakers for other manufacturers. It also notes the company's Hi-Fi Division needs speakers and has an outside option to purchase them for $57 each. There are 8 problems to solve based on whether the Audio Division is operating at or below capacity and determining the acceptable transfer price ranges from the perspective of each division and the company overall.

Uploaded by

Ahmed Ameen Nour Eldin
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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FOR EACH OF THE FOLLOWING YOU

HAVE TO WRITE A PROOF


Using the following data, to solve point 1 through 8:
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products.
Sales and cost data on the speaker follow:
Selling price per unit on the intermediate market $60
Variable cost per unit $42
Fixed costs per unit (based on capacity) $8
Capacity in units 25,000
Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will
need 5,000 speakers per year. It has received a quote of $57 per speaker from another manufacturer. Sako
Company evaluates division managers on the basis of divisional profits.

1. Assume the Audio Division is now selling only 20,000 speakers per year to outside customers. From
the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to
the Hi-Fi Division?
a. $42 b. $60 c. $57 d. None of the above

2. Assume the Audio Division is now selling only 20,000 speakers per year to outside customers. From
the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers
acquired from the Audio Division?
a. $42 b. $60 c. $57 d. None of the above

3. Assume the Audio Division is now selling only 20,000 speakers per year to outside customers. What is
the range of acceptable transfer prices (if any) between the two divisions?
a. Between $42 & $60 b. Between $42 & $57 c. Between $57 & $60 d. No acceptable range

4. Assume the Audio Division is now selling only 20,000 speakers per year to outside customers. From
the standpoint of the entire company, should the transfer take place?
a. Yes b. No

5. Assume the Audio Division is selling all of the speakers it can produce to outside customers. From the
standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the
Hi-Fi Division?
a. $42 b. $60 c. $57 d. None of the above

6. Assume the Audio Division is selling all of the speakers it can produce to outside customers. From the
standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired
from the Audio Division?
a. $42 b. $60 c. $57 d. None of the above

7. Assume the Audio Division is selling all of the speakers it can produce to outside customers. What is
the range of acceptable transfer prices (if any) between the two divisions?
a. Between $42 & $60 b Between $42 & $57 c. Between $57 & $60 d No acceptable range
. .

8. Assume the Audio Division is selling all of the speakers it can produce to outside customers. From the
standpoint of the entire company, should the transfer take place? Why or why not?
a. Yes b. No

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