Business, 21.03.2020 10:35 cutielove2912

Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below:

Capacity in units 70,000
Selling price to outside customers $ 55
Variable cost per unit $ 17
Fixed cost per unit (based on capacity) $ 31

The Electronics Division is currently purchasing 9,800 of these relays per year from an overseas supplier at a cost of $52 per relay. Assume that the Relay Division is selling all of the relays it can produce to outside customers. Also assume that $4 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 Relay and Electronics Division financially better off than if the Electronics Division were to continue buying its relays from the outside supplier?

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Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, includi...

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