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Assume Okan USA and Okan Canada are owned by the same parent company Okan International. Okan USA makes and sells electrical controllers. Okan Canada purchases electrical controllers. Head office wants to know if there is an opportunity for an internal transfer. The following information has been provided: Okan USA --- Okan USA Okan USA Capacity Variable Cost per unit Price to outside market 10,000 per month $75.00 per unit ***** $ 100.00 per unit .. Okan Canada Okan Canada Requirement per month Price paid to external supplier 2,500 per month $ 90,00 per unit 1. What division will set the maximum price? 2. What is the maximum transfer price? 3. Assume Okan USA is currently producing and selling $7,000 units, a) Is there sufficient capacity? b) what is the contribution on lost sales? c) what is the minimum transfer price? d) will a transfer happen? 4. Assume Okan is currently producing selling $10,000 units, a) Is there sufficient capacity? b) what is the contribution on lost sales? c) what is the minimum transfer price? d) will a transfer happen? 5. Assume Okan USA can save $5/unit on an internal transfer and is currently producing and selling $8,500 units, a) Is there sufficient capacity? b) what is the contribution on lost sales? c) what is the minimum transfer price? d) will a transfer happen

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