Home / Questions / Compute the contribution margin for Components Division PSF Division and Lansing Electroni...
Compute the contribution margin for Components Division, PSF Division, and
Lansing Electronics, Inc. associated with the sale of Part Y34 and Model SC67.
Show ALL workings. (15 marks)
2. Suppose that Cam DeVonn abolishes the current transfer pricing policy and
gives division autonomy in setting transfer prices. Can you predict what transfer
price the manager of the Components Division will set? What should the
minimum transfer price for this part be? The maximum transfer price?
(6 marks)
3. Given the new transfer pricing policy, predict how this will affect the production
decision for Model SC67. How many units of Part Y34 will the manager of the
PSF Division purchase, either internally or externally? (5 marks)
4. Given the new transfer price set by the Components Division and your answer
to Requirement 3, how many units of Part Y34 will be sold externally?
(4 marks)
5. Given your answers to Requirements 3 and 4, compute the firm wide
contribution margin. What has happened? Was Cam’s decision to grant
additional decentralization good or bad? Why? (5 marks)
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