Question
Wildhorse International Corporation has two divisions, Division A and Division B. Division A produces a motor that sells for $81 per unit, with the following
Wildhorse International Corporation has two divisions, Division A and Division B. Division A produces a motor that sells for $81 per unit, with the following costs based on its capacity of 186,000 units:
Direct materials | $31 | |
Direct labour | 26 | |
Variable overhead | 8 | |
Fixed overhead | 5 |
Division A is operating at 70% of normal capacity and Division B is purchasing 21,500 units of the same component from an outside supplier for $75 per unit.
Calculate the benefit, if any, to Division A in selling to Division B the 21,500 units at the outside suppliers price.
Benefit | $enter the amount of benefit in dollars |
Calculate the lowest price Division A would be willing to accept.
Lowest price | $enter the lowest price in dollars |
If Division A is operating at full capacity, what would be the lowest transfer price that it is willing to accept?
Lowest transfer price | $enter the lowest transfer price in dollars |
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