Your Division makes a part that can either be sold to outside customers or transferred internally to Division Competitor for further processing. Annual data relating to this part are as follows:   Annual production capacity     80,000 units   Demand 70,000 units   Selling price of the item to outside customers...... $35     Variable cost per unit   $23     Fixed cost per unit       $9   Division Competitor requires 15,000 units per year and is currently paying an outside supplier $33 per unit. If the transfer is made, $5 per unit of variable costs can be saved. What is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by the other division?   $22   $23   $18   $35   $30

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Your Division makes a part that can either be sold to outside customers or transferred internally to Division Competitor for further processing. Annual data relating to this part are as follows:

 

Annual production capacity    

80,000

units

 

Demand

70,000

units

 

Selling price of the item to outside customers......

$35

 

 

Variable cost per unit  

$23

 

 

Fixed cost per unit      

$9

 



Division Competitor requires 15,000 units per year and is currently paying an outside supplier $33 per unit. If the transfer is made, $5 per unit of variable costs can be saved. What is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by the other division?

 

$22

 

$23

 

$18

 

$35

 

$30

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