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Determine the lowest transfer price

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Reference no: EM133005977

Question - The North Division of Barter Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 35,000 units and the variable cost of each unit is R24. Presently the North Division sells 32,000 units per year to external customers at R40 per unit. The South Division of Barter Company would like to buy 15,000 units a year from North Division to use in its production. There would be no savings in variable costs from transferring the units internally rather than selling them externally. Determine the lowest transfer price that would be acceptable for North Division to retain the present profit.

Reference no: EM133005977

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