Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $10 Variable selling costs per unit $3 Total fixed manufacturing costs $153000 Total fixed selling costs $30000 Per unit selling price to outside buyers $60 Capacity in units per year 30000 Division B of the same company is currently buying an identical product from an outside provider for $58 per unit. It wishes to purchase 4500 units per year from Division A. Division A is currently selling 25500 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept? $60 $11 $58 $10
Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $10 Variable selling costs per unit $3 Total fixed manufacturing costs $153000 Total fixed selling costs $30000 Per unit selling price to outside buyers $60 Capacity in units per year 30000 Division B of the same company is currently buying an identical product from an outside provider for $58 per unit. It wishes to purchase 4500 units per year from Division A. Division A is currently selling 25500 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept? $60 $11 $58 $10
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Division A produces a product that it sells to the outside market. It has compiled the following:
Division B of the same company is currently buying an identical product from an outside provider for $58 per unit. It wishes to purchase 4500 units per year from Division A. Division A is currently selling 25500 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?
| Variable manufacturing cost per unit | $10 |
| Variable selling costs per unit | $3 |
| Total fixed |
$153000 |
| Total fixed selling costs | $30000 |
| Per unit selling price to outside buyers | $60 |
| Capacity in units per year | 30000 |
Division B of the same company is currently buying an identical product from an outside provider for $58 per unit. It wishes to purchase 4500 units per year from Division A. Division A is currently selling 25500 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?
$60
$11
$58
$10
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