The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry childrenor cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturingcosts. The Trailer division has capacity for 40,000 trailers per year and incurs fixed costs of $1,000,000per year. Assume the Assembly division of Baxter Bicycles wants to buy 15,000 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers, what price should be used on transfers between Baxter Bicycles’s divisions? Explain.
The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry childrenor cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturingcosts. The Trailer division has capacity for 40,000 trailers per year and incurs fixed costs of $1,000,000per year. Assume the Assembly division of Baxter Bicycles wants to buy 15,000 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers, what price should be used on transfers between Baxter Bicycles’s divisions? Explain.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 9EA: Brahma Industries sells vinyl replacement windows to home improvement retailers nationwide. The...
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The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children
or cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable
costs
per year. Assume the Assembly division of Baxter Bicycles wants to buy 15,000 trailers per year from the
Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers,
what price should be used on transfers between Baxter Bicycles’s divisions? Explain.
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