Question
1- Division A makes a part with the following characteristics: Production capacity in units 15,000 unit awlling price to outside customers 25$ variable cost per
1- Division A makes a part with the following characteristics:
Production capacity in units 15,000 unit
awlling price to outside customers 25$
variable cost per unit 18$
total fixed cost 60,000$
Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each. Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. Variable costs would decrease by $1 on any intra company transfers. What is the minimum transfer price for this transaction?
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