Biology Forums - Study Force

The Transformer division of Lorman Industries produces transformers that can be sold to outside customers or transferred to the Electronics division of the company. The following information has been collected by Lorman's controller:

Production capacity

100,000 units

Selling price

$60 per unit

Variable production cost

$36 per unit

Variable selling cost

$4 per unit

Electronics need 6,000 transformers. If the Transformer division transfers its units to the Electronics division, it can avoid $2 of the variable selling cost.

Required:

a.	If the Transformer division can only sell 80,000 units to outside customers, what is

the lowest acceptable transfer price that it is willing to accept for the 6,000 units?

b.	If the Transformer division can sell all 100,000 units to outside customers, list three

courses of action that the division might consider providing the units to Electronics.

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