At Soothing Serums, Inc., Division A produces a lotion base that is purchased by customers who add additional ingredients to create their own skin care products. Soothing Serums has decided to create a new Division B that would add some ingredients and allow Soothing Serums to enter the skin care market themselves. Division A has the capacity to produce 30,000 gallons of lotion base per month and the variable cost of each gallon is $35. Currently, Division A sells approximately 25,000 gallons of lotion base each month to customers for $47 per gallon. If they were to create Division B, it would need to purchase 15,000 gallons of lotion base per month from Division A. Division A would not realize any savings in variable costs from selling the lotion base to Division B instead of selling to outside customers. From Division A's standpoint, the lowest acceptable transfer price would be: Multiple Choice

At Soothing Serums, Inc., Division A produces a lotion base that is purchased by customers who add additional ingredients to create their own skin care products. Soothing Serums has decided to create a new Division B that would add some ingredients and allow Soothing Serums to enter the skin care market themselves. Division A has the capacity to produce 30,000 gallons of lotion base per month and the variable cost of each gallon is $35. Currently, Division A sells approximately 25,000 gallons of lotion base each month to customers for $47 per gallon. If they were to create Division B, it would need to purchase 15,000 gallons of lotion base per month from Division A. Division A would not realize any savings in variable costs from selling the lotion base to Division B instead of selling to outside customers. From Division A's standpoint, the lowest acceptable transfer price would be: Multiple Choice

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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