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Division A of a company is currently operating at 50% capacity.  It produces a single product and sells all its production to outside customers for P13 per unit.  Variable costs are P7 per unit, and fixed costs are P6 per unit at the current production level.  Division B, which currently purchases this product from an outside supplier for P12 per unit, would like to purchase the product from Division A.  Division A will operate at 80% capacity to meet the outside customer’s and Division B’s demand.  What is the minimum price that Division A should charge Division B for this product   P7 per unit P11.40 per unit P12 per unit P101 per unit

Division A of a company is currently operating at 50% capacity.  It produces a single product and sells all its production to outside customers for P13 per unit.  Variable costs are P7 per unit, and fixed costs are P6 per unit at the current production level.  Division B, which currently purchases this product from an outside supplier for P12 per unit, would like to purchase the product from Division A.  Division A will operate at 80% capacity to meet the outside customer’s and Division B’s demand.  What is the minimum price that Division A should charge Division B for this product   P7 per unit P11.40 per unit P12 per unit P101 per unit

FINANCIAL ACCOUNTING
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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Division A of a company is currently operating at 50% capacity.  It produces a single product and sells all its production to outside customers for P13 per unit.  Variable costs are P7 per unit, and fixed costs are P6 per unit at the current production level.  Division B, which currently purchases this product from an outside supplier for P12 per unit, would like to purchase the product from Division A.  Division A will operate at 80% capacity to meet the outside customer’s and Division B’s demand.  What is the minimum price that Division A should charge Division B for this product

 

  • P7 per unit
  • P11.40 per unit
  • P12 per unit
  • P101 per unit
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