Cheyenne Corporation manufactures car stereos. It is a division of Berna Motors, which manufactures vehicles....
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Cheyenne Corporation manufactures car stereos. It is a division of Berna Motors, which manufactures vehicles. Cheyenne sells car stereos to Berna, as well as to other vehicle manufacturers and retail stores. The following information is available for Cheyenne's standard unit: unit variable cost $39, unit fixed cost $22, and unit selling price to outside customer $88. Berna currently purchases a standard unit from an outside supplier for $83. Because of quality concerns and to ensure a reliable supply, the top management of Berna has ordered Cheyenne to provide 176,000 units per year at a transfer price of $33 per unit. Cheyenne is already operating at full capacity. Cheyenne can avoid $3 per unit of variable selling costs by selling the unit internally.
a. What is the minimum transfer price that Cheyenne should accept?
b. What is the potential loss to the corporation as a whole resulting from this forced transfer? (Round answer to 0 decimal places, e.g. 125.)
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You can see the logs in the Dashboard.