Business, 25.04.2020 04:24, boportsmouth7908

Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. Also, assume that the company policy is that all transfer prices are negotiated by the divisions involved.

Required:

a. What is the maximum transfer price?
b. What is the minimum transfer price?
c. Suppose that the two divisions agree on a transfer price of $35. What is the benefit for the Furniture Division? For the Motel Division? For Aulman Inc. as a whole?

Answers: 3

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Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Mote...