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engert Products, Inc., has a Motor Division that manufactures and sells a number of products,...

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Question

Accounting

engert Products, Inc., has a Motor Division that manufactures and sells a number of products, including a
standard motor. Data concerning that motor appear below:
Capacity
in
units
20,000
Current
sales
of
motors
17,000
Selling price to outside customers $ 38
Variable
cost
per
unit
$
21
Fixed cost per unit (based on capacity) $ 7
The Automotive Division ofWengert Products, Inc needs 4,000 standard motors per year. The Automotive Division is
currently purchasing a similar motor from an outside supplier for $37. The Motor Division's variable cost to
manufacture and ship this special motor would be $2 less than regular variable cost.
a. What is the minimum acceptable transfer price per unit that the Motor Division would demand?
2 decimal places
b. What is the maximum acceptable transfer price per unit that the Automotive Division would be
willing to pay?

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