7. Division X produces a single product for both Division Y and an external market. It has spare capacity to produce another 20,000 items. Additional details for Division X are as follows: Information for Division X Price of product sold to outside market Current transfer price Variable cost per item made in division Fixed costs per item (based on budget) Division Y has requested a further 5,000 items. £25 £20 £12 £6 What is the minimum price that Division X should ask per item? (a) £12 (b) £18 (c) £20 (d) £25

7. Division X produces a single product for both Division Y and an external market. It has spare capacity to produce another 20,000 items. Additional details for Division X are as follows: Information for Division X Price of product sold to outside market Current transfer price Variable cost per item made in division Fixed costs per item (based on budget) Division Y has requested a further 5,000 items. £25 £20 £12 £6 What is the minimum price that Division X should ask per item? (a) £12 (b) £18 (c) £20 (d) £25

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...

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Division A makes a part with the following characteristics: Production capacity in units.................. 15,000 units Selling price to outside customers....... P30 Variable cost per unit............................. P20 Fixed cost per unit.................................. P4 Total fixed costs...................................... P60,000 Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of P 28 each. Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division A refuses to accept the P28 price internally, the company as a whole will be:A) worse off by P40,000 each periodB) worse off by P20,000 each period. C) better off by P10,000 each…