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PP8-6B Innovative Systems

Price: $2.50


PP8-6B Innovative Systems (IS) is a division of Global Electronics, Inc. IS produces video game
systems. These systems are sold to retailers. IS recently approached the manager of
the Laptop Computer Division regarding a request to buy a special circuit board for a new
advanced video game system. IS has requested that the laptop computer division produce
200,000 units of this special circuit board. The following facts are available regarding the
Laptop (LT) Division. 200,000 units
of this special pager. The following facts are available regarding the Comm Devices Division.


Selling price of standard pager  $54
Variable cost of standard pager  $30
Additional variable cost of special pager  $20
Instructions
For each of the following independent situations, calculate the minimum transfer price, and
determine whether the Personal Communications Division should accept or reject the offer.

(a) IS has offered to pay the LT Division $62 per circuit board. The LT Division has no
available capacity. The LT Division would have to forgo sales of 200,000 circuit boards
to existing customers in order to meet the request of IS.
(b) IS has offered to pay the LT Division $90 per circuit board. The LT Division has no
available capacity. The LT Division would have to forgo sales of 250,000 circuit boards
to existing customers in order to meet the request of IS.
(c) IS has offered to pay the LT Division $62 per circuit board. The LT Division has available
capacity

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