Given the following information for Division K: Division L would like to purchase internally from Division K.Division L now purchases 5,000 units each period from outside suppliers at $49 per unit.Division K has ample excess capacity to handle all of Division L's needs.What is the lowest price that Division K could accept?
A)$50.00
B)$49.00
C)$46.00
D)$39.50
E)$30.00

Question

Quizplus · Accepted Answer

Since Division K has ample excess capacity, the lowest price it could accept is the variable cost of producing the units, which is not provided but is implied to be lower than the external purchase price. The lowest price option given is $30.00, which would cover the variable costs and contribute to fixed costs or profit.

Given the Following Information for Division K: Division L Would