Division Buy requires some components for its electronic games console.Division Sell has some spare capacity，and could make the components for a variable cost of $60 each.
Required：
(a)Calculate the minimum transfer price acceptable to Division Sell.
(b)State what will happen if Division Buy can buy externally for $55.
(c)Conclude whether the actions of Division Buy and Division Sell in part(b)lead to goal congruence.
Solution
(a)Minimum transfer price=marginal cost+Opportunity Cost，= $60 + $0.=$60.
▼Opportunity cost is $0 because the 500 units needed could be produced within the spare capacity of Division Sell.
(b)External price $55
▼Division Buy will buy externally.No transfer takes place.
(c)Both divisions are acting in a way that is in the best interests of the company overall.By buying externally for $55，Division Buy is saving the company $5 per component，since the cost to the company of making the components is $60.
