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Division A makes a part that it sells to customers outside of the company. Data...

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Accounting

Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below:

Selling price to outside customers $ 94
Variable cost per unit $ 60
Total fixed costs $ 704,000
Capacity in units 44,000

Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $87 per unit and would substitute the part made by Division A. Division B requires 6,900 units of the part each period. Division A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division A?

  • $94.

  • $76.

  • $16.

  • $60.

pt2 Division B has variable manufacturing costs of $62 per unit and fixed costs of $12 per unit. Assuming that Division B is operating significantly below capacity, what is the opportunity cost of an internal transfer when the market price is $84?

  • $0.

  • $22.

  • $62.

  • $74.

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