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Wellston Small Motor

Price: $1.99


Wellstone Company’s Small Motor Division manufactures a number of small motors
used in household and office appliances. The Household Division of Wellstone then
assembles and packages such items as blenders and juicers. Both divisions are free to buy
and sell any of their components internally or externally. The following costs relate to
small motor LN233 on a per unit basis.


Fixed cost per unit   5
Variable cost per unit   9
Selling price per unit   30

Instructions
(a) Assuming that the Small Motor Division has excess capacity, compute the minimum
acceptable price for the transfer of small motor LN233 to the Household Division.
(b) Assuming that the Small Motor Division does not have excess capacity, compute the
minimum acceptable price for the transfer of the small motor to the Household Division.

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