Question
Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin,...
Rapid Industries has multiple divisions. One division, Iron
Products, makes a component that another division, Austin, is
currently purchasing on the open market. Iron Products currently
has a capacity to produce 515,000 components at a variable cost of
$7.00 and a full cost of $9.00. Iron Products has outside sales of
477,000 components at a price of $13.00 per unit. Austin currently
purchases 50,000 units from an outside supplier at a price of
$11.00 per unit. Assume that Austin desires to use a single
supplier for its component.
a. What will be the effect on Rapid Industries’
operating profit if the transfer is made internally? Assume the
50,000 units Austin needs are either purchased 100% internally or
100% externally.
b. What is the minimum transfer price?
(Round your answer to 2 decimal places.)
c. What is the maximum transfer price?
(Round your answer to 2 decimal places.)
Homework Answers
Answer #1
The answer has been presenetd in the supporting sheet.
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