Henderson Company manufactures electronics. The Calculator Division (an investme

Question

Henderson Company manufactures electronics. The Calculator Division (an investment center) manufactures handheld calculators. The division can purchase the batteries used in the calculators from the Battery Division (another investment center) or from an outside vendor. The cost to purchase batteries from the outside vendor is $5. The transfer price to purchase from the Battery Division is $6. The Battery Division also sells to outside customers. The sales price is $6, and the variable cost is $3. The Battery Division has excess capacity Read the requirements Requirement 1. Should the Calculator Division purchase from the Battery Division or the outside vendor? 0 A. The Calculator Division should purchase from the Battery Division as long as the transfer price is $5.00 or less O B. The Calculator Division should purchase from the Battery Division as long as the transfer price is $6.00 or less ° C. The Calculator Division should purchase from the outside vendor as long as the transfer price is $3.00 or more 0 D. The Calculator Division should purchase from the outside vendor as long as the transfer price is $5.00 or less because the Battery Division has excess capacity because the Battery Division has excess capacity because the Battery Division is operating at capacity because the Battery Division has excess capacity Requirement 2. If Henderson Company allows division managers to negotiate transfer prices, what is the maximum transfer price the manager of the Calculator Division should consider? The maximum transfer price the Calculator Division should consider is Requirement 3. What is the minimum transfer price the manager of the Battery Division should consider? The minimum transfer price the Battery Division should consider is

Explanation / Answer

1 The Calculator Division should purchase from the Battery Division as long as the transfer price is $5.00 or less because the Battery Division has excess capacity. 2 Maximum transfer price = $5 3 Minimum transfer price = $3 4 Minimum transfer price = $6

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