Germano Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standa
Posted: Sat May 07, 2022 8:39 pm
Germano 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 10,000 of
these pumps per year from an overseas supplier at a cost of $94 per
pump.
Assume that the Pump Division has enough idle capacity to handle
all of the Pool Products Division’s needs. Does there exist a
transfer price that would make both the Pump and Pool Products
Division financially better off than if the Pool Products Division
were to continue buying its pumps 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 10,000 of
these pumps per year from an overseas supplier at a cost of $94 per
pump.
Assume that the Pump Division has enough idle capacity to handle
all of the Pool Products Division’s needs. Does there exist a
transfer price that would make both the Pump and Pool Products
Division financially better off than if the Pool Products Division
were to continue buying its pumps from the outside supplier?