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 80,000 units Selling price of the item to outside customers...... $55 Variable cost per unit $25 Fixed cost per unit $5 Division Competitor requires 10,000 units per year and is currently paying an outside supplier $33 per unit. If the transfer is made, $7 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 10,000 units needed by the other division? Group of answer choices $25 $32 $18 $48 $55
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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 |
80,000 |
units |
|
|
Selling price of the item to outside customers...... |
$55 |
|
|
|
Variable cost per unit |
$25 |
|
|
|
Fixed cost per unit |
$5 |
|
Division Competitor requires 10,000 units per year and is currently paying an outside supplier $33 per unit. If the transfer is made, $7 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 10,000 units needed by the other division?
Group of answer choices
$25
$32
$18
$48
$55
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