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Division A manufactures an aircraft engine component with unit variable product cost of $38 and market price of $50. Division A incurs shipping costs of
Division A manufactures an aircraft engine component with unit variable product cost of $38 and market price of $50. Division A incurs shipping costs of $3 per unit for sales to outside parties only. Division B uses this component in the manufacture of its own engine production activities. Top management allows negotiated transfer pricing. If Division A is operating at full capacity, the maximum transfer price (the ceiling of the bargaining range) is:
a.$38.
b.$50.
c.$44.
d.$47.
e.There is no bargaining range.
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