Assume a company has two divisions, Division A and Division B. Division A has provided...
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Accounting
Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market:
Selling price per unit (on the outside market)
$ 67
Variable cost per unit
$ 51
Fixed costs per unit (based on capacity)
$ 4
Capacity in units
20,000
Division B could use Division As product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes. If that the companys divisional managers are evaluated based their divisions profits and Division A is currently selling 20,000 units on the outside market, what is lowest acceptable transfer price for Division A if it were to sell 4,000 units to Division B?
Multiple Choice
$71
$67
$65
$63
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