Division A of Sebastian Enterprises manufactures a product called XYZ. Current d
ID: 2557112 • Letter: D
Question
Division A of Sebastian Enterprises manufactures a product called XYZ. Current data for Division A are as follows:
Capacity
61739
Current production & sales
46120
Per unit data
Selling price
$93.63
Variable costs - production
33.62
Variable costs – marketing relating to external sales
15.26
Fixed costs (total)
$795312
Division B of Sebastian Enterprises currently buys 21420 units of XYZ yearly from an outside supplier at a price of $55.07. Division B would like to buy the 21420 units of XYZ it needs annually from Division A.
What is the incremental benefit (cost) to Sebastian Enterprises if an internal transfer takes place?
Select one:
a. $-595448
b. $459459
c. $-127005
d. $199864
Capacity
61739
Current production & sales
46120
Explanation / Answer
b. $459459
According to the descriptive data given above, the incremental benefit (cost) to Sebastian Enterprises if an internal transfer takes place is $459,459