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Assume a company has two divisions, Division A and Division B. Division A has provided...

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Accounting

Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market:

Selling price per unit (on the outside market) $ 67
Variable cost per unit $ 51
Fixed costs per unit (based on capacity) $ 4
Capacity in units 20,000

Division B could use Division As product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes. If that the companys divisional managers are evaluated based their divisions profits and Division A is currently selling 20,000 units on the outside market, what is lowest acceptable transfer price for Division A if it were to sell 4,000 units to Division B?

Multiple Choice

$71

$67

$65

$63

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