Answer and Explanation:
Sako Company's Audio Division
a. If Audio Division is currently selling only 49,000 speaker each year to outside customers at the stated $43 price, it means division is having spare capacity of 9000 speaker.
Lowest acceptable transfer price from the perspective of the audio Division = Variable cost per speaker
= $20
b. Highest acceptable transfer price from the perspective of the Hi-fi Division = marker price from outside supplier = $35 per speaker
c. Range of acceptable transfer prices (if any) between the two divisions = $20 to $35
Yes, the managers of the Audio and Hi-fi Divisions likely to voluntarily agree to a transfer price for 9,000 speakers.
d. Yes, from stand point of company also, this transfer should take place.
Solution 2:
a. If Audio Division can sell all of its speaker to outside customers for $43 per speaker, lowest acceptable transfer price from the perspective of the audio Division is selling price i.e. $43 per speaker
b. Highest acceptable transfer price from the perspective of the Hi-fi Division = marker price from outside supplier = $35 per speaker
c. Range of acceptable transfer prices (if any) between the two divisions - Range of acceptable transfer price cannot be established as lowest acceptable transfer price for audio division is higher than highest acceptable transfer price of Hifi division.
Manager of Audio and Hi -fi division is not likely to voluntarily agree to a transfer price for 9,000 speakers.
d. From stand point of the entire company also, this transfer should not take place.