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10 Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below Selling price to outside
10 Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below Selling price to outside customers Variable cost per unit Total sed costs Capacity in units $40 S30 S10,000 20,000 Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part from an outside company for $38 per unit and would like to by the part from Division A. Division B requires 3,000 units of the part each period. Division A is now selling only 15.000 units to outside customers. Required What should be the lowest acceptable transfer price by Division A? (Show your calculations) a. (4 marks) b. Assume that Division A has no excess capacity and sells all 20,000 units to outside customers, calculate the transfer price that Division A would be willing to accept. (Show your calculations) (4 marks) c. If the selling expenses of Division A when selling to outside customers is $3. Calculate (a) and (b) above again (8 marks)
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