Cohasset Company currently manufactures all component parts used in the manufact
ID: 2472780 • Letter: C
Question
Cohasset Company currently manufactures all component parts used in the manufacture of various hand tools. Hurley Division produces a steel handle used in three different tools. The budget for these handles is 120,000 units with the following unit cost.
Ironwood Division purchases 39,000 handles from Hurley Division and completes the hand tools. An outside supplier, R & M Steel, has offered to supply 39,000 units of the handle to Ironwood Division for $2.26 per unit. Hurley currently has idle capacity that cannot be used.
If Cohasset would like to develop a range of transfer prices, what would be the maximum transfer price that Ironwood would be willing to pay?
A. $3.95
B. $4.45
C. $2.90
D. $2.26
Cohasset Company currently manufactures all component parts used in the manufacture of various hand tools. Hurley Division produces a steel handle used in three different tools. The budget for these handles is 120,000 units with the following unit cost.
Explanation / Answer
The Maximum Transfer price $2.26 that Ironwood would be willing to pay i.e the price which is availabe in market
Option D