Division A makes a part with the following characteristics: Production capacity in units- 15,000 units Selling price to outside customers- $25 Variable cost per unit- $18 Total fixed costs- $60,000 Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A.  Division A is currently selling 10,000 units to its outside customers.   What should be the lowest acceptable transfer price from the perspective of Division A

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 6BE
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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- $25

Variable cost per unit- $18

Total fixed costs- $60,000

Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A.  Division A is currently selling 10,000 units to its outside customers.   What should be the lowest acceptable transfer price from the perspective of Division A? 

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