41 - 22-36(Contd.)Accept OrderReject Order1.Contribution...

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Unformatted text preview: 22-36(Contd.)Accept OrderReject Order1.Contribution margin from selling 2,000 units of new engine, $210 2,0002.Incremental cost of making and transferring 2,000 units or 3,200 units of old engines, $200 2,000; $200 3,2003.Incremental costs of purchasing 1,200 units from outside, $400 1,200$(420,000)400,000480,000$460,000$640,000$640,000San Ramon Corporation should a. make 2,000 units of the new engine in the Engine Divisionb. make 2,000 units of the existing engine for the Assembly Division c. have the Assembly Division purchase 1,200 existing engines from the outside market2.The options facing the Engine Division manager are (a) to sell 2,000 units of the special order engine and make 2,000 units for the Assembly Division, or (b) to make 3,200 units for the Assembly Division. The contribution margin per unit from accepting the special order is $210 per unit. Let the transfer price be $X. Then, we want to find X such that$210 2,000 + ($X $200) 2,000=($X $200) 3,200...
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41 - 22-36(Contd.)Accept OrderReject Order1.Contribution...

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