Question
Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $12 Variable selling
Division A produces a product that it sells to the outside market. It has compiled the following:
Variable manufacturing cost per unit $12 Variable selling costs per unit $3 Total fixed manufacturing costs $167000 Total fixed selling costs $30000 Per unit selling price to outside buyers $56 Capacity in units per year 30000
Division B of the same company is currently buying an identical product from an outside provider for $54 per unit. It wishes to purchase 5000 units per year from Division A. Division A is currently selling 26000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?
$12.00
$56.00
$19.40
$20.20
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