Division A, which is operating at capacity, produces a component that currently sells in a competitive market for $42 per unit. At the current level of production, the fixed cost of producing this component is $11 per unit and the variable cost is $11 per unit. Division B would like to purchase this component from Division A. The price that Division A should charge Division B for this component is: Multiple Choice $11 per unit. $22 per unit. $36 per unit. $42 per unit. $53 per unit.

Division A, which is operating at capacity, produces a component that currently sells in a competitive market for $42 per unit. At the current level of production, the fixed cost of producing this component is $11 per unit and the variable cost is $11 per unit. Division B would like to purchase this component from Division A. The price that Division A should charge Division B for this component is: Multiple Choice $11 per unit. $22 per unit. $36 per unit. $42 per unit. $53 per unit.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?
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