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Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $8 Variable selling
Division A produces a product that it sells to the outside market. It has compiled the following:
Variable manufacturing cost per unit | $8 |
Variable selling costs per unit | $3 |
Total fixed manufacturing costs | $141000 |
Total fixed selling costs | $30000 |
Per unit selling price to outside buyers | $52 |
Capacity in units per year | 30000 |
Division B of the same company is currently buying an identical product from an outside provider for $50 per unit. It wishes to purchase 4200 units per year from Division A. Division A is currently selling 25800 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?
$8
$9
$50
$52
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