(Answered)-8.18 Company Q has three divisions, B, S, and L. It also deals with two other compan Division B...

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8.18                             Company Q has three divisions, B, S, and L. It also deals with two other compan Division B can buy a widget from division S or from company X, which will me price of $200 per unit. If B buys from X, X in turn bu ys a component from divis per uni t; the outlay costs to division  L of supplying this component are $20  per B's order, S incurs outlay costs of $165 per unit. Assume that division S is wo capacity and can provide the widget to an outside buyer (i.e., company Y) at the price of $200 per unit and with the same outlay costs of $165 per unit. 1.      What alternative would be  the best  for company  Q as a whole-B  buying  fr X or division S? Draw the boxes. Show supporting calculations. 2.      What transfer price should be used to guide the managers of divisions B an maximize overall company net income (cash inflow)? 3.      Suppose that division S has enough extra capacity to supply the widget to bo and the outside buyer at the same time. How would this change your answers t 2? Show supporting calculations.    

 

Solution ID:10137810 | Question answered on 16-Oct-2016

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