20-16 Economic order quantity for retailer. Fan Base (FB) operates a 20-16 Economic order quantity for retailer. Fan Ba | Page 2

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1.Calculate the EOQ.
2.Calculate the number of orders that will be placed each year.
3.Calculate the reorder point.

22-35 Transfer pricing, goal congruence. The Croydon Division of CC Industries supplies the
Hauser Division with 100,000 units per month of an infrared LED that Hauser uses in a remote
control device it sells. The transfer price of the LED is $8, which is the market price. However,
Croydon does not operate at or near capacity. The variable cost to Croydon of the LED is $4.80,
while Hauser incurs variable costs (excluding the transfer price) of $12 for each remote control.
Hauser’s selling price is $32.
Hauser’s manager is considering a promotional campaign. The market research department of
Hauser has developed the following estimates of additional monthly volume associated with
additional monthly promotional expenses.

Additional Monthly Promotional

$80,00

$120,00

$160,00

Expenses:

0

0

0

Additional Monthly Volume (Units)

10,000

15,000

18,000

Required
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1.What level of additional promotional expenses would the Hauser division manager
choose?
2.As the manager of the Croydon division, what level of additional promotional
expenses would you like to see the Hauser division manager select?
3.As the president of CC Industries, what level of spending would you like the Hauser
division manager to select?