Division A and Division B are decentralized divisions.

Division A has currently and historically purchased units from Division B at $75 per unit.

As a result of acquiring a new customer, Division B no longer has the capacity to produce units for Division A. Division B is still willing to continue producing for Division A, but is looking to raise their price to $103 per unit. As a result, Division A is now thinking about purchasing these units from an outside supplier for $85 per unit.

Division B could sell the same units to an external customer for $109.

Division A's annual requirement is 1,027 units. Division B's costs for this amount of units are:

• Variable cost per unit: $69
• Annual fixed costs: $14,292 - These costs will be incurred regardless of whether a sale is made by Division B to Division A or not.

Required.

 What is the minimum transfer price?

Answer rating: 100% (QA)

Transfer price refers to the price at which one department tran... View the full answer