Division-A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers ----------------------- $88 Variable cost per unit -------------------------------------- $49 Total fixed costs ------------------------------------- $495,000 Capacity in units ---------------------------------------- 34,500 Division-B of the same company would like to use the part manufactured by Division-A in one of its products. Division-B currently purchases a similar part made by an outside company for $87 per unit and would substitute the part made by Division-A. Division-B requires 8,800 units of the part each period. Division-A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division-A? 84 87 88 49
7. Division-A makes a part that it sells to customers outside of the company. Data concerning this part appear below:
Selling price to outside customers ----------------------- $88
Variable cost per unit -------------------------------------- $49
Total fixed costs ------------------------------------- $495,000
Capacity in units ---------------------------------------- 34,500
Division-B of the same company would like to use the part manufactured by Division-A in one of its products. Division-B currently purchases a similar part made by an outside company for $87 per unit and would substitute the part made by Division-A. Division-B requires 8,800 units of the part each period. Division-A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division-A?
84
87
88
49
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
