Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $77 per unit and would substitute the part made by Division X. Division Y requires 7,800 units of the part each period. Division X can sell all tomers What is the Jowest acceptable transfer price from the standpoint of the selling division? ite it molron to

Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $77 per unit and would substitute the part made by Division X. Division Y requires 7,800 units of the part each period. Division X can sell all tomers What is the Jowest acceptable transfer price from the standpoint of the selling division? ite it molron to

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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Question

TB MC Qu. 15-51 (Algo) Division X makes a part that it...
Division X makes a part that It sells to customers outside of the company. Data concerning this part appear below
Selling price to outside customers
Variable cost per unit
Total fixed costs
%$4
78
$4
44
$470,000
32,000
Capacity in units
Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by
an outside company for $77 per unit and would substitute the part made by Division X. Division Y requires 7,800 units of the part each period. Division X can sell all
of the units it makes to outside customers. What is the lowest acceptable transfer price from the standpoint of the selling division?
%24

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Division X makes a part with the following characteristics: Production capacity.. 25,000 units $18 Selling price to outside customers. Variable cost per unit. $11 Fixed cost, total. $100,000 Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose that Division X is operating at capacity and can sell all of its output to outside customers. If Division X sells the parts to Division Y at $17 per unit, the company as a whole will be: Select one: a. better off by $10,000 each period. b. worse off by $20,000 each period. C. worse off by $10,000 each period. d. There will be no change in the status of the company as a whole.