Flash E - Card Manufacturing manufactures software parts for the computer software systems that produce e - cards. The Flash II part is currently manufactured in the Computer Department. The Data Department also produces the part and the plant has excess capacity to produce the Flash II part. The current market price of the Flash II part is $ 900.. The managerial accountant reported the following manufacturing costs and variable expense data:

Flash E - Card Manufacturing

Manufacturing Costs and Variable Expense Report

Flash Component (Bold section should be attached to list of expense data below question and solutions.)_If the highest acceptable transfer price is $ 900in the market, what is the lowest acceptable in - house price the Data Department should receive to produce the part in - house at the Computer Department?

A.

$ 850

B.

$ 200

C.

$ 120

D.

$ 1,170

Direct Materials:

$850

Direct labor:

$120

Variable manufacturing overhead:

$200

Fixed manufacturing overhead (current production level):

$165

Variable selling expenses (only incurred on sales to outside consumers):

$116