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Division has the following costs per tire:

$($i$)($Click the icon to view the costs and additional information.$)$

Read the requirements.

transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? $($Assume the $$6$ includes only the variable portion of conversion costs.$)$

The lowest acceptable transfer price is

$,$ the Tire Division's

More info

Direct material cost per tire $$24$

Conversion costs per tire $$6($Assume the $$6$ includes only the variable portion of

conversion costs.$)$

Fixed manufacturing overhead cost for the year is expected to total $$116,000.$ The Tire Division

expects to manufacture $58,000$ tires this year. The fixed manufacturing overhead per tire is $$2$

$($ $$116,000$ divided by $58,000$ tires$).$

Requirements

Assume that the Tire Division has excess capacity, meaning that it can produce tires for

the Tractor Division without giving up any of its current tire sales to outsiders. If Grissell

Motors has a negotiated transfer price policy, what is the lowest acceptable

transfer price? What is the highest acceptable transfer price?

If Grissell Motors has a cost$-$plus transfer price policy of full absorption cost plus $25\%.$

what would the transfer price be$?$

If the Tire Division is currently producing at capacity $($meaning that it is selling every single

tire it has the capacity to produce$),$ what would likely be the fairest transfer price strategy

to use? What would be the transfer price in this case?

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