Division A of Tripper Company produces a part that it sells to other companies. Sales and cost
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Question:
Division A of Tripper Company produces a part that it sells to other companies. Sales and cost data for the part follow:
Capacity in units | 60,000 | units |
---|---|---|
Selling price per unit | $ 40 | per unit |
Variable costs per unit | $ 28 | per unit |
Fixed costs per unit at capacity | $ 9 | per unit |
Division B, another division of Tripper Company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, $1 in variable costs can be avoided.
Assume that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into outside sales. what is the lowest acceptable transfer price from the viewpoint of the selling division?
Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
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