Question
Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $9Variable selling costs
Division A produces a product that it sells to the outside market. It has compiled the following:
Variable manufacturing cost per unit
$9Variable selling costs per unit$3Total fixed manufacturing costs$153000
Total fixed selling costs$30000Per unit selling price to outside buyers$40Capacity in units per year30000
Division B of the same company is currently buying an identical product from an outside provider for $38per unit. It wishes to purchase4700units per year from Division A. Division A is currently selling30000units of the product per year. If the internal transfer is made, Division A willnotincur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?
$9
$10
$38
$40
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