Raven, Inc. has a division that manufactures a component that sells for $185 and has a variable cost of $50. Another division of the company wants to purchase the component. Fixed cost per unit of the component is $21. What is the minimum transfer price if the division is operating below its capacity?

Raven, Inc. has a division that manufactures a component that sells for $185 and has a variable cost of $50. Another division of the company wants to purchase the component. Fixed cost per unit of the component is $21. What is the minimum transfer price if the division is operating below its capacity?

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

Raven, Inc. has a division that manufactures a component that sells for $185 and has a variable cost of $50. Another division of the company wants to purchase
the component. Fixed cost per unit of the component is $21. What is the minimum transfer price if the division is operating below its capacity?
O A. $185
O B. $71
OC. $50
O D. $21

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