Nanke Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor that could be used by another division in the company, the Safety Products Division, in one of its products. Data concerning that sensor appear below: Capacity in units 58,000
Selling price to outside customers $64
Variable cost per unit $20
Fixed cost per unit (based on capacity) $17

The Safety Products Division is currently purchasing 3,000 of these sensors per year from an overseas supplier at a cost of $59 per sensor. Assume that the Sensor Division is selling all of the sensors it can produce to outside customers. What should be the minimum acceptable transfer price for the sensors from the standpoint of the Sensor Division?

$64

Explanation:

The minimum acceptable transfer price for the sensors from the standpoint of the Sensor Division is a price that would be the best for the performance evaluation of the Sensor Division Manager and also best for the company.

If the division is transferring items to another division the goals remain the same and the price is calculated as :

Minimum acceptable transfer price = variable costs - internal savings + opportunity cost

Therefore,

Minimum acceptable transfer price =  $20 + ( $64 - $20)

                                                            = $64

Therefore, the minimum acceptable transfer price for the sensors from the standpoint of the Sensor Division is $64 assuming that there is an opportunity cost of $44 that is ($64 - $20).

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

answer; commerce clearing house;