35 - 22-33(Contd.)At a price of $37 per cassette deck, the...

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Unformatted text preview: 22-33(Contd.)At a price of $37 per cassette deck, the net cost of $190,000 is less than the net cost of $230,000 if Sather Corporation made the cassette decks inhouse. Hence, Sather Corporation should outsource to Johnson.At a price of $43 per cassette deck, the net cost of $250,000 is greater than the net cost of $230,000 if Sather Corporation made the cassette decks inhouse. Hence, Sather Corporation should reject Johnsons offer.2.For the Cassette Deck Division and the Assembly Division to take actions that are optimal for Sather Corporation as a whole, the transfer price should be set at $41, calculated as follows:The Cassette Deck Division can manufacture at most 12,000 cassette decks and is currently operating at capacity. The incremental costs of manufacturing a cassette deck are $25 per deck. The opportunity cost of manufacturing cassette decks for the Assembly Division is (1) the contribution margin of $10 (selling price, $35 minus incremental costs $25) that the Cassette Deck Division would forgo by not selling...
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This note was uploaded on 02/05/2012 for the course ACCOUNTING acct 504 taught by Professor Dehmal during the Spring '10 term at DeVry Pittsburgh.

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35 - 22-33(Contd.)At a price of $37 per cassette deck, the...

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