Reference no: EM132520540

Arian International Corporation has two divisions, Division A and Division B. Division A produces a motor that sells for $92 per unit, with the following costs based on its capacity of 182,000 units:

Direct materials                $31

Direct labour                     27

Variable overhead                10

Fixed overhead                       9

• Division A is operating at 70% of normal capacity and Division B is purchasing 28,000 units of the same component from an outside supplier for $87 per unit.

Question 1: Calculate the benefit, if any, to Division A in selling to Division B the 28,000 units at the outside supplier's price.

Question 2: Calculate the lowest price Division A would be willing to accept.

Question 3: If Division A is operating at full capacity, what would be the lowest transfer price that it is willing to accept?