Buzzs Florida Division is currently purchasing a part from an outside supplier. The company's Georgia Division, which has excess capacity, makes and sells this part for external customers at a variable cost of $18 and a selling price of $30. If Georgia begins sales to Florida, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $4. If sales to outsiders will not be affected, Georgia would establish a transfer price of:

Multiple Choice

• $14.

• $18.

• $26.

• $30.

• None of the answers is correct.

Darrins Auto Northern Division is currently purchasing a part from an outside supplier. The company's Southern Division, which has no excess capacity, makes and sells this part for external customers at a variable cost of $22 and a selling price of $34. If Southern begins sales to Northern, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $3. On the basis of this information, Southern would establish a transfer price of:

Multiple Choice

• $19.

• $22.

• $31.

• $34.

• None of the answers is correct.