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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
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:
The company uses the opportunity cost approach to transfer pricing. Which case should not be transferred internally?
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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