Division A produces a part with the following characteristics: Capacity in units 52,000 Selling price per unit $ 32 Variable costs per unit $ 14 Fixed costs per unit $ 5 Division B, another division in the company, would like to buy this part from Division A. Division B is currently purchasing the part from an outside source at $30 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without impacting sales to outside customers. From the point of view of Division A, any sales to Division B should be priced no lower than: Multiple Choice $13. $32. $31. $14.
Division A produces a part with the following characteristics: Capacity in units 52,000 Selling price per unit $ 32 Variable costs per unit $ 14 Fixed costs per unit $ 5 Division B, another division in the company, would like to buy this part from Division A. Division B is currently purchasing the part from an outside source at $30 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without impacting sales to outside customers. From the point of view of Division A, any sales to Division B should be priced no lower than: Multiple Choice $13. $32. $31. $14.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Division A produces a part with the following characteristics:
| Capacity in units | 52,000 | ||
| Selling price per unit | $ | 32 | |
| Variable costs per unit | $ | 14 | |
| Fixed costs per unit | $ | 5 | |
Division B, another division in the company, would like to buy this part from Division A. Division B is currently purchasing the part from an outside source at $30 per unit. If Division A sells to Division B, $1 in variable costs can be avoided.
Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without impacting sales to outside customers. From the point of view of Division A, any sales to Division B should be priced no lower than:
Multiple Choice
-
$13.
-
$32.
-
$31.
-
$14.
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