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  1. business
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  3. after 5 years, company has acquired a shoe manufac

After 5 years, COMPANY has acquired a shoe manufacturing unit as part of an inorganic...

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Accounting

After 5 years, COMPANY has acquired a shoe manufacturing unit as part of an inorganic growth via diversification. The shoe making business is structured as two independent divisions, the Boot Division and the Sole Division.
The Sole Division makes rubber soles for hiking boots and work boots and sells these soles to other boot manufacturers in the local market.
The Boot Division manufactures leather uppers for hiking boots. The leather uppers are attached to rubber soles and sold in the local market. In the first year of acquisition, the Boot Division purchased rubber soles from outside suppliers.
However, top management of COMPANY now wants the Sole Division to provide at least some quantity of soles to the Boot Division. The table shows the contribution margin per unit for the divisions for the scenario where the Boot Division purchases soles from an outside supplier. The top management of COMPANY wants its Pricing Department to think about how the two divisions can work together.
Help the Pricing Department determine a fair transfer price if the Sole division were to sell 10,000 soles to the Boot division.
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