Practice Question 11 options:

a)$7 per unit

b)$9 per unit

c)$4 per unit

d)$2 per unit

Markey Corporation consists of two divisions, North and South. The North makes Glop, a product that can be used in the production of the product that the South division makes and sells. Both divisions are considered profit centers. The following data are available concerning Glop and the two divisions: North South Average units produced 150,000 Average units sold 150,000 Variable manufacturing cost $2 per unit Variable finishing cost per $5 unit Fixed divisional costs $75,000 $125,000 The South Division can buy the Glop from other firms for $4. The South Division sells its product for $12. If there is no intermediate market for the Glop and the transfer price is set at $4 per unit, what is the minimum price that the South Division can charge for its product and still cover its differential costs