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Production department A use hydraulic valves as an input and can buy these valves at an...

Production department A use hydraulic valves as an input and can buy these valves at an external market price of $800 per unit. This department requires 10,000 valve per period.

Production department B has capacity to 9,000 of Department A's valves. It produces these valve at a unit variable cost of $500 and unit fixed costs of $200. It sells the valves at $850 per unit.

What is the maximum transfer price for the valve?

A) $535

B) $530

C) $850

D) $800

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Answer #1


solution: maximum transfer price for the valve Explanation: since Dept. A pays $800 per unit to external supplier hence it wo

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