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E13-31 Minimum Transfer Price, Capacity, Contribution Margins Nexa's Division A produces a product that can be sold for $200 or transferred to Division B as
E13-31 Minimum Transfer Price, Capacity, Contribution Margins Nexa's Division A produces a product that can be sold for $200 or transferred to Division B as a component for its product. Division B can buy the part from another suppler at $180. In the current period, Division B purchased 1,000 units from Division A. Data on a per-unit basis follows: Division A Division B Selling price $200 $600 Variable cost 100 200 Allocated fixed 90 159 cost The variable cost in Division B does not include the cost of the component provided by Division A or the outside supplier. REQUIRED A. Calculate the minimum transfer price if Division A is operating at capacity. B. Calculate the minimum transfer price if Division A is operating below capacity. C. Calculate the effect on the company's contribution margin if Division A has excess capacity and Division B buys 1,000 units from the outside supplier. D. Calculate the contribution margin for the company for 1,000 units if Division A is required to sell to Division B when there is no excess capacity. E. Calculate the contribution margin for the company if Division A is at capacity and sells 1,000 units to the external market and Division B purchases 1,000 units from an outside supplier. F. Is it more profitable for the company to require Division A to transfer units to Division B? Explain. G. If there are no outside suppliers and Division A is operating at capacity, is the
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