Capacity in units Selling price per unit Variable cost per unit Fixed cost per unit at capacity 60,000 units $40 per unit $28 per unit $9 per unit Division B, another division of SLG Company, would like to buy this part from Division A. Division B is currently pa part from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs interfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer perspective of Division A?
Capacity in units Selling price per unit Variable cost per unit Fixed cost per unit at capacity 60,000 units $40 per unit $28 per unit $9 per unit Division B, another division of SLG Company, would like to buy this part from Division A. Division B is currently pa part from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs interfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer perspective of Division A?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Division A of SLG Company produces a part it sells to other companies. Sales and cost data for the part are as follows:
Capacity in units
60,000 units
Selling price per
unit
O $27 per unit
O $39 per unit
O $36 per unit
O $41 per unit
Variable cost per
unit
O None of the above.
Fixed cost per unit
at capacity
Division B, another division of SLG Company, would like to buy this part from Division A. Division B is currently purchasing the
part from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs can be avoided.
Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs and without
interfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer price from the
perspective of Division A?
$40 per unit
$28 per unit
$9 per unit
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