Division Details:

• Division A (Selling Division):
  • Variable Costs: $500,000
  • Fixed Costs: $250,000
  • Production Capacity: 30,000 units

• Division B (Buying Division):
  • Variable Costs: $400,000
  • Fixed Costs: $200,000
  • Demand: 25,000 units

Requirements:

• Determine the transfer price per unit for Division B to acquire products from Division A using the cost-plus method.
• Evaluate the impact on the overall profitability of the company.
• Present the transfer pricing calculations in a table.
• Discuss the benefits and challenges of the chosen transfer pricing method.