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Division A produces a component for HKL Company's main product automobiles. The division operates as a prot centre. It also sells to outsiders. The present
Division A produces a component for HKL Company's main product automobiles. The division operates as a prot centre. It also sells to outsiders. The present selling price is $75 per component. The company buys 600,000 units of a similar component per year from outside sources. The external purchase price is $73 as a result of a quantity discount. Division A has adequate capacity to supply the needs of the Assembly division. The following data are for Division A: Direct material $30 per unit Direct labour $25 per unit Variable overhead $10 per unit Fixed overhead (based on a capacity of 5,000 $6 per unit units) The price range within which Awould sell components to the Assembly Division is: 0 $71 to $73 0 $65 to $73 0 $71 to $75 0 $65 to $75
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