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What would be the minimum transfer price per unit

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Reference no: EM132510575

Division A produces a product that it sells to the outside market. It has compiled the following:

Variable manufacturing cost per unit            $11

Variable selling costs per unit                   $3

Total fixed manufacturing costs              $158000

Total fixed selling costs                     $30000Per unit

selling price to outside buyers            $46

Capacity in units per year                   30000

Question 1: Division B of the same company is currently buying an identical product from an outside provider for $44 per unit. It wishes to purchase 5100 units per year from Division A. Division A is currently selling 30000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?

Option 1: $11

Option 2: $12

Option 3: $44

Option 4: $46

Reference no: EM132510575

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