Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

VIS currently acquiring a Key component from its Sister Company , F, at a transfer Price of $ 10 PER unit . FE variable cost

image text in transcribed
image text in transcribed
VIS currently acquiring a Key component from its Sister Company , F, at a transfer Price of $ 10 PER unit . FE variable cost of purchasing the unit is $ 4, and its fixed cost per unit is $3 per unit . FdoES not have any EXCESS capacity and Can sell all it makes to External customers at 4 10 per unit . Vhas been offered a price of IS per unit for the component from another vendor and is insisting that F reduce its price to $5. Which of the following statement below is false regarding this scenario ?" SELECT one @ a . V Should not accept the outside offer because the variable cost of purchasing it inside is only $ 4 per unit ~` O b. Since F is operating at full capacity and has other external customers ready to purchase additional units , the best transfer price is its regular market price OF the company would be better off if F rejects V's demand and instead Sells the units that " would buy to outside customers O d . V should purchase the unit extemally because the cost of purchasing the unit internally is a variable cost of $ 4 per unit plus an opportunity cost Of $ 6 per unit , or $10

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Accounting For Governmental And Not-for-Profit Organizations

Authors: Paul Copley

14th Edition

1260570177, 978-1260570175

More Books

Students also viewed these Accounting questions

Question

5. It is the needs of the individual that are important.

Answered: 1 week ago

Question

3. It is the commitment you show that is the deciding factor.

Answered: 1 week ago