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Division A of Arctic Co., makes a part that can either be sold to customers or transferred internally to Division B. The annual data gathered are as follows: Annual production capacity 40,000 units Selling price P25 Variable cost per unit 12 Fixed cost per unit 5 Division B of Arctic Co. requires 10,000 units per year and is currently paying an outside supplier $22 per  unit. 1. If outside customers demand only 20,000 units per year, what is the lowest acceptable transfer  price?  2. If outside customers demand 40,000 units per year, what is the lowest acceptable transfer  price?

Division A of Arctic Co., makes a part that can either be sold to customers or transferred internally to Division B. The annual data gathered are as follows: Annual production capacity 40,000 units Selling price P25 Variable cost per unit 12 Fixed cost per unit 5 Division B of Arctic Co. requires 10,000 units per year and is currently paying an outside supplier $22 per  unit. 1. If outside customers demand only 20,000 units per year, what is the lowest acceptable transfer  price?  2. If outside customers demand 40,000 units per year, what is the lowest acceptable transfer  price?

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 Arctic Co., makes a part that can either be sold to customers or transferred internally to Division B.

The annual data gathered are as follows:


Annual production capacity 40,000 units
Selling price P25
Variable cost per unit 12
Fixed cost per unit 5


Division B of Arctic Co. requires 10,000 units per year and is currently paying an outside supplier $22 per 
unit.


1. If outside customers demand only 20,000 units per year, what is the lowest acceptable transfer 
price? 

2. If outside customers demand 40,000 units per year, what is the lowest acceptable transfer 
price?

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