Question
Assume Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit
Assume Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 100 Variable cost per unit $ 70 Fixed costs per unit (based on capacity) $ 6 Capacity in units 30,000 Division A has been offered the opportunity to sell 5,000 units of its only product to another division within the same company. The other division can either agree to a transfer price with Division A or purchase a comparable product on the outside market for $100. If Division A is currently selling 27,500 units on the outside market and the other division chooses to buy 5,000 units on the outside market (rather than agreeing to a transfer price with Division A), what is the impact on profits for the company as a whole? Multiple Choice Profits would decrease by $75,000 Profits would decrease by $45,000 Profits would decrease by $83,000 Profits would decrease by $52,500
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