Week 5, individual assignments - David Trejo

Week 5, individual assignments - David Trejo - E8-11 Allied...

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E8-11 Allied Company’s Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Allied then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis. Fixed cost per unit $ 5 Variable cost per unit 8 Selling price per unit 30 Instructions (a) Assuming that the Small Motor Division has excess capacity, compute the minimum acceptable price for the transfer of small motor LN233 to the Household Division. *** When excess price exists, the minimum acceptable transfer prices is the variable cost per unit. In this case, the minimum acceptable transfer price is $8. (b) Assuming that the Small Motor Division does not have excess capacity, compute the minimum acceptable price for the transfer of the small motor to the Household Division. *** Selling price of $30, less variable cost of $8 equals an opportunity cost of $22.
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Week 5, individual assignments - David Trejo - E8-11 Allied...

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