Question
TVs R Us is a multi-national company manufacturing TVs. It has two divisions: Screen division and Assembly division. Screen division makes screens and assembly division
TVs R Us is a multi-national company manufacturing TVs. It has two divisions: Screen division and Assembly division. Screen division makes screens and assembly division assembles TVs. Both divisions are decentralized and can make their own selling/buying decisions. For a new type of TV, the assembly division is asking the screen division to supply a custom-made screen.Relevant data for the screen division is provided below:Screen division's installed capacity21,000screens per yearDemand for the regular screens from the external market15,000screens per yearVariable cost of manufacturing per unit of regular screen$90.00Variable selling cost for per unit of regular screen$10.50Allocated fixed manufacturing costs per screen$25.00Fixed selling costs per screen$5.00Variable manufacturing cost per unit of custom-made screen$105.00Current selling price of regular screens to the external market$210.00Quantity of custom-made screens required by the assembly division10,000screens per year (No partial quantity can be accepted)Screen division does not make any screen similar to the custom screen demanded by the Assembly division. However, it believes that the custom screen will consume the same capacity as the regular screens that it is currently manufacturing for its external customers. No variable selling cost applies for internal transfers but as per company policy, the same fixed manufacturing and selling costs apply for both internal and external sales.What is the transfer price (per unit) for the transfer of custom made screens as per the general transfer pricing rule?
A.$214.50
B.$210.00
C.$125.50
D.$105.00
E.$148.80
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