Shaw is a lumber company that also manufactures custom cabinetry. It is made up

Question

Shaw is a lumber company that also manufactures custom cabinetry. It is made up of two divisions: Lumber and Cabinetry. The Lumber Division is responsible for harvesting and preparing lumber for use; the Cabinetry Division produces custom-ordered cabinetry. The lumber produced by the Lumber Division has a variable cost of $3.20 per linear foot and full cost of $4.20. Comparable quality wood sells on the open market for $9.60 per linear foot. (Enter your answers to 2 declmal places.) Required: 1uu are the manager of the Cabinetry Dision, Determine the masimum amount you woud pay for lumber 2. Assume you are the manager of the Lumber Division. Determine the minimum amount you would charge for the lumber if you have excess capacity Repeat assuming you have no excess capacity Minimum Price with Excess Capacity Minimum Price without Excess Capacity 3. Assume you are the president of Shaw Determine a mutually beneficial transfer price assuming there is excess capacity Mütually Beneficial Transfer

Explanation / Answer

Part 1)

The maximum price that the manager of the of the Cabinetry Division would be the price at which the lumber would be available in the market. Therefore, the maximum price would be $9.60 per linear foot.

______

Tabular Representation:

______

Part 2)

The minimum price with excess capacity that would be acceptable to Lumber Division would be equal to its variable cost of $3.20 per linear foot.

The minimum price without excess capacity that would be acceptable to Lumber Divison would be equal to the price at which it can sell lumber in the open market. Therefore, the minimum price would be $9.60 per linear foot.

______

Tabular Representation:

______

Part 3)

The mutually beneficial transfer price should be set between $3.20 and $9.60 to benefit both the divisions. To provide same advantage to both the divisions, the transfer price can be set at $6.40. This would provide $3.20 per linear foot additional value above variable cost (6.40 - 3.20) to Lumber Division and provide savings of $3.20 per linear foot (9.60 - 6.40) to the Cabinetry Division.

______

Tabular Representation:

Maximum Price $9.60

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.