Question

Division A has variable manufacturing costs of $57 per unit and fixed costs of $12 per...

Division A has variable manufacturing costs of $57 per unit and fixed costs of $12 per unit. Assuming that Division A is operating significantly below capacity, what is the optimal transfer price of an internal transfer when the market price is $82?

Multiple Choice

  • $25.

  • $57.

  • $69.

  • $24.

0 0
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Answer #1

Since Division A's Operating capacity is Significantly below the capacity limit, It can price the internal transfer at a minimum of variable cost. As fixed cost is irrelevant since it was sunk cost.

So optimal transfer price of an internal transfer is $ 57/.

Answer is $ 57/.

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