Find what is the minimum transfer price

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Question 1: Division X is has capacity to make 100 units and is currently selling 80 units to the intermediate market. It's selling price to the intermediate market is $26 per unit and its variable costs per units are DM $5, DL $3, VMOH $2, and Variable Selling and Administrative costs $1. Division Y requires 30 of these units and can purchase them externally from an outside supplier for $29 per unit. If Division X sells to Division Y, they can avoid $1 variable selling and administrative costs. Using the general transfer pricing rule, what is the minimum transfer price?

Option a. $15

Option b. $26

Option c. $25

Option d. $10

Reference no: EM132523658

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