Word Concord is a publishing company with a number of different book lines. Each line has contracts with a number of different authors. The company also ourns 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 Concord, as well as authors under contract with other companies. The printing operation bills out at $0.01 per page, and a typical book reguires 450 pages of print. A manager from Business Books one of Word Concordt’s book thes has approached the manager of the printing operation offering to pay per page for 1,400 copies of a 450 page book. The book line pays outside printers per page. The printing operation’s variable cost per prge is .

Determine whether the printing should be done internally or externall)s 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 decimol places es. (Q.1888)

Printing should be done

Minimum transfer price $
eTextbook and Media

Save for Later
Attempts: 0 of 10 used
SubmitArswer
(b)

The parts of this question must be completed in order. This part will be available when you complete the part above.

Ask by Daniel Munoz. in the United States

Mar 27,2025

Question

Word Concord is a publishing company with a number of different book lines. Each line has contracts with a number of different authors. The company also ourns 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 Concord, as well as authors under contract with other companies. The printing operation bills out at $0.01 per page, and a typical book reguires 450 pages of print. A manager from Business Books one of Word Concordt’s book thes has approached the manager of the printing operation offering to pay per page for 1,400 copies of a 450 page book. The book line pays outside printers per page. The printing operation’s variable cost per prge is .

Determine whether the printing should be done internally or externall)s 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 decimol places es. (Q.1888)

Printing should be done

Minimum transfer price $
eTextbook and Media

Save for Later
Attempts: 0 of 10 used
SubmitArswer
(b)

The parts of this question must be completed in order. This part will be available when you complete the part above.

Ask by Daniel Munoz. in the United States

Mar 27,2025

UpStudy AI · Accepted Answer

**(a) Analysis when Quick Press is booked solid**

1. The printing operation normally earns revenue of  
   $$
   \$0.01 \text{ per page}
   $$  
   when printing for outside customers.

2. Its variable cost is  
   $$
   \$0.003 \text{ per page.}
   $$

3. When booked solid, accepting the internal order would force Quick Press to cancel an existing obligation. In effect, by taking the internal order they lose the opportunity to earn the full outside revenue. The lost contribution per page equals the lost revenue minus the variable cost that would have been incurred on the outside job:  
   $$
   \$0.01 - \$0.003 = \$0.007 \text{ per page.}
   $$

4. Therefore, to be indifferent between the two alternatives, Quick Press must receive at least its variable cost plus the lost contribution:  
   $$
   \$0.003 + \$0.007 = \$0.010 \text{ per page.}
   $$

5. The minimum transfer price that Quick Press would accept for the internal order is  
   $$
   \$0.0100 \text{ per page (to four decimal places)}.
   $$

6. The internal manager is offering only  
   $$
   \$0.007 \text{ per page},
   $$  
   which is below the minimum transfer price of \$0.0100 per page.

**Conclusion for (a):**  
- The printing should be done externally since the offered internal transfer price is too low compared to the opportunity cost.
- The minimum transfer price Quick Press must charge is  
  $$
  \$0.0100 \text{ per page.}
  $$
**(a) Printing should be done externally.** *Minimum transfer price: \$0.0100 per page.*

Solución de inteligencia artificial de Upstudy

Responder

Solución

Mind Expander

preguntas relacionadas

Latest Economics Questions