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Division A of a company is currently at 50% capacity. It produces a single product and sells all of its production to outside customers for
Division A of a company is currently at 50% capacity. It produces a single product and sells all of its production to outside customers for S13 per unit. Variable costs are $7 per unit and fixed costs, which are unavoidable and do not increase with production, are $6 per unit. The same company's Division B, which currently purchases this product from an outside supplier for $12 per unit, would like to purchase the product from Division A. Division A would operate at 80% capacity to meet outside customers' and Division B's demand. What is the minimum transfer price that Division A should charge Division B for this product? Select one: 2. $12.00 per unit O b. $7.00 per unit c. $10.40 per unit d. $13.00 per unit
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