Crane Company manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 10000 units to the Production Division at 1050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $1550 and unit variable costs and fixed costs of $1050 and $500, respectively. The Production Division is currently paying $1400 per unit to an outside supplier. $60 per unit can be saved on internal sales from reduced selling expenses. What is the minimum transfer price that the Engine Division should accept? $1490 $1550 $500 $1400
Crane Company manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 10000 units to the Production Division at 1050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $1550 and unit variable costs and fixed costs of $1050 and $500, respectively. The Production Division is currently paying $1400 per unit to an outside supplier. $60 per unit can be saved on internal sales from reduced selling expenses.
What is the minimum transfer price that the Engine Division should accept?
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