Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Selling price per unit on the intermediate market $43
Variable costs per unit $20
Fixed costs per unit (based on capacity) $6
Capacity in units 58,000
Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 9,000 speakers per year. It has received a quote of $35 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume that the Audio Division is now selling only 49,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
No
Yes
d. From the standpoint of the entire company, should the transfer take place?
Transfer should take place.
Transfer should not take place.
2. Assume that the Audio Division is selling all of the speakers it can produce to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?

No

Yes

d. From the standpoint of the entire company, should the transfer take place?

Transfer should take place.

Transfer should not take place.

a. If Audio Division is currently selling only 49,000 speaker each year to outside customers at the stated $43 price, it means division is having spare capacity of 9000 speaker.

Lowest acceptable transfer price from the perspective of the audio Division = Variable cost per speaker

= $20

b. Highest acceptable transfer price from the perspective of the Hi-fi Division = marker price from outside supplier = $35 per speaker

c. Range of acceptable transfer prices (if any) between the two divisions = $20 to $35

Yes, the managers of the Audio and Hi-fi Divisions likely to voluntarily agree to a transfer price for 9,000 speakers.

d. Yes, from stand point of company also, this transfer should take place.

Solution 2:

a. If Audio Division can sell all of its speaker to outside customers for $43 per speaker, lowest acceptable transfer price from the perspective of the audio Division is selling price i.e. $43 per speaker

b. Highest acceptable transfer price from the perspective of the Hi-fi Division = marker price from outside supplier = $35 per speaker

c. Range of acceptable transfer prices (if any) between the two divisions - Range of acceptable transfer price cannot be established as lowest acceptable transfer price for audio division is higher than highest acceptable transfer price of Hifi division.

Manager of Audio and Hi -fi division is not likely to voluntarily agree to a transfer price for 9,000 speakers.

d. From stand point of the entire company also, this transfer should not take place.

swatiupadhyay714 swatiupadhyay714 · Answer 2 · 2021-11-23T11:31:23+01:00

The manufacturing unit is the unit that deals with the production of goods and services. It is the unit that deals with the supply of the goods and services that are in demand by the customers.

Sako Company's Audio Division

a. If Audio Division is currently selling only 49,000 speakers each year to outside customers at the stated $43 price, it means the division is having a spare capacity of 9000 speakers.

Lowest acceptable transfer price from the perspective of the audio Division = Variable cost per speaker

= $20

b. Highest acceptable transfer price from the perspective of the Hi-fi Division = marker price from outside supplier = $35 per speaker

c. Range of acceptable transfer prices (if any) between the two divisions = $20 to $35

Yes, the managers of the Audio and Hi-fi Divisions are likely to voluntarily agree to a transfer price for 9,000 speakers.

d. Yes, from standpoint of the company also, this transfer should take place.

Solution 2:

a. If Audio Division can sell all of its speakers to outside customers for $43 per speaker, the lowest acceptable transfer price from the perspective of the audio Division is the selling price i.e. $43 per speaker

b. Highest acceptable transfer price from the perspective of the Hi-fi Division = market price from outside supplier = $35 per speaker

c. Range of acceptable transfer prices (if any) between the two divisions - Range of acceptable transfer price cannot be established as the lowest acceptable transfer price for audio division is higher than the highest acceptable transfer price of the Hifi division.

The manager of the Audio and Hi-fi division is not likely to voluntarily agree to a transfer price for 9,000 speakers.

d. From standpoint of the entire company also, this transfer should not take place.

To know more about the calculations of the various other formulas, refer to the link below:

https://brainly.com/question/15689072