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What the minimum price at which a would sell components

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Reference no: EM132576713

Division A produces a component for Hielkema Company's main product - automobiles. The division operates as a profit centre. It also sells to outsiders. The present selling price is $75 per component. The company buys 600,000 units of a similar component per year from outside sources. The external purchase price is $73 as a result of a quantity discount. Division A has adequate capacity to supply the needs of the Assembly division.

The following data are for

Division A:

Direct material $30 per unit

Direct labour $25 per unit

Variable overhead $10 per unit

Fixed overhead (based on a capacity of 5,000 units) $6 per unit

Question 1: The minimum price at which A would sell components internally is:

Select one:

Option a. $71

Option b. $73

Option c. $75

Option d. $65

Reference no: EM132576713

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