Division A produces a product that it sells to the outside market. It has compil
ID: 2549165 • Letter: D
Question
Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $10 Variable selling costs per unit $ 3 Total fixed manufacturing costs $150,000 Total fixed selling costs $30,000 Per unit selling price to outside buyers $40 Capacity in units per year 30,000 Division B of the same company is currently buying an identical product from an outside provider for $38 per unit. It wishes to purchase 5,000 units per year from Division A. Division A is currently selling 25,000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the maximum transfer price per unit that Division B would be willing to accept?
a.$40
b.$38
c.$10
d.$11
Explanation / Answer
Maximum transfer price per unit that Division B would be willing to accept is $38 Option B is correct