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Boom Division of Avatar Corporation produces and sells aircraft parts. Its variable costs per unit...

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Accounting

Boom Division of Avatar Corporation produces and sells aircraft parts. Its variable costs per unit are $75 for direct materials, $15 for direct labour and $10 for variable manufacturing overhead. It currently can sell it parts on the outside market at a price of $140 per unit. Fixed overhead costs are $8 per unit based on a denominator volume of 180,000 units.

The Crunch Division of Avatar Corporation has approached the Boom Division and requested that it supply 25,000 units of the aircraft parts at a transfer price of $120. Assuming Boom Division has idle capacity, what is the transfer price the Boom Division should agree to accept?

A.

$120

B.

$130

C.

$140

D.

$100

E.

$150

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