FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below:

  Case 1 Case 2
Division A:    
    Capacity in units 100,000 100,000
    Number of units sold externally 100,000 60,000
    Market selling price $90 $75
    Variable costs per unit 73 58
    Fixed costs per unit based on capacity 10 10
     
Division B:    
    Number of units needed for production 40,000 40,000
    Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. Which case should not be transferred internally?
a.Both should be transferred internally.
b.Neither should be transferred internally.
c.Case 1
d.Case 2
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