Royal Products, Inc., has a Connector Division that manufactures and sells a number of products,...
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Royal Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below:
| Capacity in units | 66,000 | |
| Selling price to outside customers | $ | 69 |
| Variable cost per unit | $ | 21 |
| Fixed cost per unit (based on capacity) | $ | 35 |
The Transmission Division is currently purchasing 6,000 of these connectors per year from an overseas supplier at a cost of $65 per connector.
What is the maximum price that the Transmission Division should be willing to pay for connectors transferred from the Connector Division?
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