In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1Case 2Division A: Capacity in units100,000100,000 Number of units sold externally100,00060,000 Market selling price$90$75 Variable costs per unit7358 Fixed costs per unit based on capacity1010 Division B: Number of units needed for production40,00040,000 Purchase price per unit from external supplier$86$74The company uses the opportunity cost approach to transfer pricing. Which case should not be transferred internally?a.Both should be transferred internally.b.Neither should be transferred internally.c.Case 1d.Case 2

Opportunity cost refers to the expenses involved in evaluating the capable benefits to an individual…

Answered: In the Bombadier Company, Division A…

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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In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below:

	Case 1	Case 2
Division A:
Capacity in units	100,000	100,000
Number of units sold externally	100,000	60,000
Market selling price	$90	$75
Variable costs per unit	73	58
Fixed costs per unit based on capacity	10	10

Division B:
Number of units needed for production	40,000	40,000
Purchase price per unit from external supplier	$86	$74