Nita Corp.'s Department II is introducing a new product that will use component C. An outside supplier has quoted Department Il a price of P96 per unit. This represents the usual P100 price less a quantity discount due to the large number of Department Il's requirements. The Company has transfer price formula of: Transfer price = Variable cost per unit + Lost contribution margin per unit on outside sales. Department I has enough excess capacity to handle all of Department II's needs. For the overall interest of the company, Department I should (M)

Nita Corp.'s Department II is introducing a new product that will use component C. An outside supplier has quoted Department Il a price of P96 per unit. This represents the usual P100 price less a quantity discount due to the large number of Department Il's requirements. The Company has transfer price formula of: Transfer price = Variable cost per unit + Lost contribution margin per unit on outside sales. Department I has enough excess capacity to handle all of Department II's needs. For the overall interest of the company, Department I should (M)

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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What should the transfer price be and why?