Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $11 Variable selling costs per unit $3 Total fixed manufacturing costs $145000 Total fixed selling costs $30000 Per unit selling price to outside buyers $53 Capacity in units per year 30000 Division B of the same company is currently buying an identical product from an outside provider for $50 per unit. It wishes to purchase 6000 units per year from Division A. Division A is currently selling 25000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept? $11.00 $16.50 $53.00 $17.50
Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $11 Variable selling costs per unit $3 Total fixed manufacturing costs $145000 Total fixed selling costs $30000 Per unit selling price to outside buyers $53 Capacity in units per year 30000 Division B of the same company is currently buying an identical product from an outside provider for $50 per unit. It wishes to purchase 6000 units per year from Division A. Division A is currently selling 25000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept? $11.00 $16.50 $53.00 $17.50
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 21E
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Question
Division A produces a product that it sells to the outside market. It has compiled the following:
Division B of the same company is currently buying an identical product from an outside provider for $50 per unit. It wishes to purchase 6000 units per year from Division A. Division A is currently selling 25000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?
Variable manufacturing cost per unit | $11 |
Variable selling costs per unit | $3 |
Total fixed |
$145000 |
Total fixed selling costs | $30000 |
Per unit selling price to outside buyers | $53 |
Capacity in units per year | 30000 |
Division B of the same company is currently buying an identical product from an outside provider for $50 per unit. It wishes to purchase 6000 units per year from Division A. Division A is currently selling 25000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?
$11.00
$16.50
$53.00
$17.50
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