Answered: Using the following data, what would…

Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity.
Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price?
Variable cost per unit $6.13
• Fixed cost per unit 1.73
• Division B sales price of Component X 14.50

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