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Word Sheffield is a publishing company with a number of different book lines. Each line has contracts with a number of different

authors. The company also owns a printing operation called Quick Press. The book lines and the printing operation each operate as a

separate profit center. The printing operation earns revenue by printing books by authors under contract with the book lines owned

by Word Sheffield, as well as authors under contract with other companies. The printing operation bills out at $$0\mathrm{.}01$ per page, and a

typical book requires $380$ pages of print. A manager from Business Books, one of Word Sheffield's book lines, has approached the

manager of the printing operation offering to pay $$0\mathrm{.}006$ per page for $1,600$ copies of a $380-$page book. The book line pays outside

printers $$0\mathrm{.}007$ per page. The printing operation's variable cost per page is $$0\mathrm{.}004.$

Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of the

following situations.

$($a$)$

Assume that the printing operation is booked solid for the next $2$ years, and it would have to cancel an obligation with an outside

customer in order to meet the needs of the internal division. $($Round Transfer price to $4$ decimal places, e$.$g$.0\mathrm{.}1810.$ Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of the following situations.

Calculate the change in contribution margin to each division, and to the company as a whole, if top management forces the printing operation to accept the $$0\mathrm{.}006$ per page transfer price when it has no available capacity.

done: no capacity$=$ printing should be done $[$externally$]$ minimum transfer price $[$$$\mathrm{.}01]$

done: capacity$=$ printing should be done $[$internally$]$ minimum transfer price $[$$$\mathrm{.}004]$

not done:

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