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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education