Tron Products, Incorporated has a Pump Division that manufactures and sells a number of products, including a standard p
Posted: Sat May 07, 2022 8:39 pm
Tron Products, Incorporated has a Pump Division that
manufactures and sells a number of products, including a standard
pump that could be used by another division in the company, the
Pool Products Division, in one of its products. Data concerning
that pump appear below:
The Pool Products Division is currently purchasing 4,000 of
these pumps per year from an overseas supplier at a cost of $94 per
pump.
Assume that the Valve Division is selling all of the valves it
can produce to outside customers. Also assume that $3 in variable
expenses can be avoided on transfers within the company due to
reduced shipping and selling costs. Does there exist a transfer
price that would make both the Valve and Pump Division financially
better off than if the Pump Division were to continue buying its
valves from the outside supplier?
manufactures and sells a number of products, including a standard
pump that could be used by another division in the company, the
Pool Products Division, in one of its products. Data concerning
that pump appear below:
The Pool Products Division is currently purchasing 4,000 of
these pumps per year from an overseas supplier at a cost of $94 per
pump.
Assume that the Valve Division is selling all of the valves it
can produce to outside customers. Also assume that $3 in variable
expenses can be avoided on transfers within the company due to
reduced shipping and selling costs. Does there exist a transfer
price that would make both the Valve and Pump Division financially
better off than if the Pump Division were to continue buying its
valves from the outside supplier?