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Problem - The Western Division of Prvto Corporation sells Part D to other companies for $78.50 per unit. According to the company's cost accounting system, the costs to Western Division to make a unit o1 Product D are:
Direct material $62
Direct labor $2
Variable manufacturing overhead $10
Fixed manufacturing overhead $2
The Southern Division of Pryto Corporation uses a part much like Part D in one of its products. The Southern Division can buy this part from an outside supplier for $78.25 per unit. However, the Southern Division could use Part D instead of this part that it purchases from outside suppliers. What is the most that the Southern Division would be willing to pay the Western Division for Product D?
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