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11 - 36 Effects of transfer price choices Mccann Company has two divisions, Division C and Division D. Division C manufactures Part C82 and sells
11 - 36 Effects of transfer price choices Mccann Company has two divisions, Division C and Division D. Division C manufactures Part C82 and sells it to Division D, and also sells the same part to the outside market for $50 per unit. Division C has capacity to make 400,000 units of C82 per year. The division's fixed costs are $5,000,000 per year and its variable cost per unit are as follows: Direct materials $20 Direct labor 12 Variable overhead 8 Part C82 is an essential component for Division D's only product; the division sells 200,000 units per year at a price of $120 per unit. Division D's fixed costs are $4,000,000 per year and its variable costs per unit, excluding the cost of Part C82, are as follows: Direct materials $10 Direct labor 25 Variable overhead 10
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