Question: Varcore Inc. is currently acquiring a key component from its sister company, Farcore Inc., at a transfer price of $ 1 0 per unit. Farcore's

Varcore Inc. is currently acquiring a key component from its sister company, Farcore Inc., at a transfer price of $10 per unit. Farcore's variable cost of purchasing the unit is $4, and its fixed cost per unit is $3 per unit. Farcore does not have any excess capacity and can sell all it makes to external customers at $10 per unit. Varcore has been offered a price of $9 per unit for the component from another vendor and is insisting that Farcore reduce its price to $9. Which of the following statements below is false regarding this scenario?
a.
The company will be better off if Farcore rejects Varcore's demand and instead sells the units that Varcore would buy to outside customers.
b.
Since Farcore is operating at full capacity and has other external customers ready to purchase additional units, the best transfer price is its regular market price.
c.
Varcore should purchase the unit externally because the internal cost of purchasing the unit internally is a variable cost of $4 per unit plus an opportunity cost of $6 per unit, or $10.
d.
Varcore should not accept the outside offer because the variable cost of purchasing it inside is only $4 per unit.

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