Division P can make a unit for a standard variable cost of £10 and a standard fixed cost per unit (based on budgeted production) of £3. This would then be transferred to Division Q, which would have a further standard variable cost of £8 and fixed costs per unit of £4 before selling at £21 per unit. There are no external markets for the item to be transferred between divisions. If the transfer price is set at £12, what will be the reaction of the divisions? Division P Division Q A) Will be willing to produce units Will be willing to produce units B) Will be willing to produce units Will be unwilling to produce units C) Will be unwilling to produce units Will be willing to produce units D) Will be willing to produce units Will be unwilling to produce units
Division P can make a unit for a
If the transfer price is set at £12, what will be the reaction of the divisions?
Division P Division Q
A) Will be willing to produce units Will be willing to produce units
B) Will be willing to produce units Will be unwilling to produce units
C) Will be unwilling to produce units Will be willing to produce units
D) Will be willing to produce units Will be unwilling to produce units
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