Your Division makes a part that can either be sold to outside customers or transferred internally to Division Competitor for further processing. Annual data relating to this part are as follows: Annual production capacity 80,000 units Demand 70,000 units Selling price of the item to outside customers...... $40 Variable cost per unit $25 Fixed cost per unit $9 Division Competitor requires 25,000 units per year and is currently paying an outside supplier $33 per unit. If the transfer is made, $5 per unit of variable costs can be saved. What is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by the other division? Group of answer choices $25 $29 $20 $40 $35
Your Division makes a part that can either be sold to outside customers or transferred internally to Division Competitor for further processing. Annual data relating to this part are as follows: Annual production capacity 80,000 units Demand 70,000 units Selling price of the item to outside customers...... $40 Variable cost per unit $25 Fixed cost per unit $9 Division Competitor requires 25,000 units per year and is currently paying an outside supplier $33 per unit. If the transfer is made, $5 per unit of variable costs can be saved. What is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by the other division? Group of answer choices $25 $29 $20 $40 $35
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 7EB: Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has...
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Question
Your Division makes a part that can either be sold to outside customers or transferred internally to Division Competitor for further processing. Annual data relating to this part are as follows:
Division Competitor requires 25,000 units per year and is currently paying an outside supplier $33 per unit. If the transfer is made, $5 per unit of variable costs can be saved. What is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by the other division?
|
Annual production capacity
|
80,000
|
units
|
|
Demand
|
70,000
|
units
|
|
Selling price of the item to outside customers......
|
$40
|
|
|
Variable cost per unit
|
$25
|
|
|
Fixed cost per unit
|
$9
|
|
Division Competitor requires 25,000 units per year and is currently paying an outside supplier $33 per unit. If the transfer is made, $5 per unit of variable costs can be saved. What is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by the other division?
Group of answer choices
$25
$29
$20
$40
$35
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