Question
The Florida Division of McKenna Company makes and sells batteries that can either be sold to outside customers or transferred to the Alabama Division of
The Florida Division of McKenna Company makes and sells batteries that can either be sold to outside customers or transferred to the Alabama Division of McKenna Company. The following data are available from last month:
| Florida Division: |
|
| Selling price per battery to outside customers............................ | $50 |
| Variable cost per battery when sold to outside customers......... | $35 |
| Capacity in batteries................................................................... | 15,000 |
|
|
|
| Alabama Division: |
|
| Number of batteries needed per month...................................... | 5,000 |
| Price per battery paid to an outside supplier.............................. | $47 |
If Florida Division sells the batteries to Alabama Division, Florida Division can avoid $2 per battery in sales commissions.
Suppose that Florida Division sells 11,500 batteries each month to outside customers. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
A. $47.00
B. $43.50
C. $37.50
D. $34.73
E. Some other amount
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