Question
ABC Company has two divisions: Division A and Division B. Division A produces a product that it sells to Division B for further processing. The
ABC Company has two divisions: Division A and Division B. Division A produces a product that it sells to Division B for further processing. The current transfer price of the product is $60 per unit. Division B can process the product and sell it for $100 per unit. Division A is currently operating at full capacity and has no excess capacity to produce more products. The variable cost of producing the product is $40 per unit, and the fixed cost of Division A is $300,000. The company is considering whether to change the transfer price from $60 per unit to $80 per unit. What would be the impact of this decision on the company's overall profit? Show your calculations to support your answer.
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Managerial Accounting Tools for business decision making
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
6th Edition
978-0470477144, 1118096894, 9781118214657, 470477148, 111821465X, 978-1118096895
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