Question

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 $ 47
Variable costs per unit $ 17
Fixed costs per unit (based on capacity) $ 8
Capacity in units 56,000

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 9,000 speakers per year. It has received a quote of $35 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.Assume that the Audio Division is now selling only 49,000 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?

Answer 1

.

Step-by-step explanation:

The lowest acceptable movement price by Audio Division is shifting cost of making the more parts which are 17 dollars. making to capacity will have no effect on the fixed cost because it will not change regardless on increase in production.

Answer 2

The lower acceptable transfer price by Audio Division is variable cost of producing the extra unit which is $17. Producing to capacity will have no effect on the fixed cost because it will not change regardless on increase in production.

Step-by-step explanation: