Boots Company has two divisions. Land Division, which has operating assets of $80,000,000 produces and sells 900,000 items of a product at a market worth of $140 per unit. Variable prices complete $40 per unit. The division additionally assigns $70 of mounted prices to every unit based mostly on complete capability of 1,000,000 items.Sea Division desires to buy 200,000 items from Land. Nonetheless, it is just keen to pay $80 per unit as a result of it has a chance to simply accept a particular order at a lowered worth. The order is economically justifiable provided that Sea Division can purchase Land Division’s output at a lowered worth.Boots Company’s price of capital is 15%.Required:What’s the gross sales income at this switch worth?What’s the residual earnings for Land Division with out the switch to Sea Division?What’s Land Division’s residual earnings if it transfers 200,000 items to Sea Division at $80 every?What’s the minimal switch worth for the 200,000-unit order that Land would settle for if it had been keen to take care of the identical residual earnings with the switch as it will settle for by promoting its 900,000 items to the skin market?If Land Division had no capability constraints, what’s the minimal switch worth it may settle for on the order from Sea Division? Clarify your reply.If Land Division may promote all items produced to the skin market, what switch worth would you advocate? Why?

Published by

Essays

View all posts