(Appendix 12A)Division 1 of Ace Company makes and sells wheels that can either be sold to outside customers or transferred to Division 2.The following data are available from last month: Division 1: Division 2: If Division 1 sells the wheels to Division 2, Division 1 can avoid $2 per unit in sales commissions.
What is the maximum price per wheel that Division 2 should be willing to pay Division 1 if a transfer were to take place?
A)$33 per unit
B)$35 per unit
C)$47 per unit
D)$50 per unit

Question

(Appendix 12A)Division 1 of Ace Company makes and sells wheels that can either be sold to outside customers or transferred to Division 2.The following data are available from last month: Division 1:  Division 2:  If Division 1 sells the wheels to Division 2, Division 1 can avoid $2 per unit in sales commissions.
What is the maximum price per wheel that Division 2 should be willing to pay Division 1 if a transfer were to take place?
A)$33 per unit 
B)$35 per unit 
C)$47 per unit 
D)$50 per unit

Quizplus · Accepted Answer

Division 2 would not be willing to pay more than $47 per unit, the amount it would have to pay an outside supplier for the wheels.

(Appendix 12A)Division 1 of Ace Company Makes and Sells Wheels