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Honey Division Produces a product that it sells to the outside market. It has compiled...

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Accounting

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

Variable Manufacturing Cost per unit : $15

Total Fixed Manufacturing Costs : $150,000

Total Fixed Selling Cost: $30,000

Per Unit Selling Price to Outside Buyers: $40

Capacity in units per year $25,000

Bread division of the same company is currently buying an identical product from an outside provider for $38 per unit. It wishes to purchase 3000 units per year from Honey. If the internal transfer is made, Honey will not incur any selling costs.

Question: Calculate the minimum transfer price per unit, explain why these prices are acceptable,

i) Honey is currently selling 18,000 units to external customers.

ii) Humpty is currently selling 25,000 Units

iii) If Bread were to buy from Honey in ii)? What are the total gains or loss for i) and for ii)

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