Question Content AreaIn Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is as follows: Case 1Case 2Division A: Capacity in units100,000100,000 Number of units sold externally100,00060,000 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 production40,00040,000 Purchase price per unit from external supplier$86$74The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?

Maximum transfer price Opportunity Cost is the next best alternative opportunity foregone if a…

Answered: Question Content Area In Bombadier…

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 Content Area

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

	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