Given the following data for Electrical Cord Division:
$$\begin{array} { l r }
\text { Selling price to outside customers } & \$40 \
\text { Variable cost per unit } & 30 \
\text { Total fixed cost } & 10,000 \
\text { Capacity (in units) } & 2,000
\end{array}$$
Assume that the Electrical Cord Division is selling all it can produce to outside customers. If it sells to the Appliance Division, $1 can be avoided in variable cost per unit. The Appliance Division is presently purchasing from an outside supplier at $38 per unit. From the point of view of the company as a whole, any sales to the Appliance Division should be priced at:
A) $40.
B) $39.
C) $38.
D) The company would not want the transfer to take place.

Question

Given the following data for Electrical Cord Division:
$$\begin{array} { l r } 
\text { Selling price to outside customers } & \$40 \
\text { Variable cost per unit } & 30 \
\text { Total fixed cost } & 10,000 \
\text { Capacity (in units) } & 2,000
\end{array}$$
Assume that the Electrical Cord Division is selling all it can produce to outside customers. If it sells to the Appliance Division, $1 can be avoided in variable cost per unit. The Appliance Division is presently purchasing from an outside supplier at $38 per unit. From the point of view of the company as a whole, any sales to the Appliance Division should be priced at:
A) $40.
B) $39.
C) $38.
D) The company would not want the transfer to take place.

Quizplus · Accepted Answer

The Answer of Given the following data for Electrical Cord Division:
$$\begin{array} { l r } 
\text { Selling price to outside customers } & \$40 \
\text { Variable cost per unit } & 30 \
\text { Total fixed cost } & 10,000 \
\text { Capacity (in units) } & 2,000
\end{array}$$
Assume that the Electrical Cord Division is selling all it can produce to outside customers. If it sells to the Appliance Division, $1 can be avoided in variable cost per unit. The Appliance Division is presently purchasing from an outside supplier at $38 per unit. From the point of view of the company as a whole, any sales to the Appliance Division should be priced at:
A) $40.
B) $39.
C) $38.
D) The company would not want the transfer to take place.

Given the Following Data for Electrical Cord Division Assume That the Electrical Cord Division Is Selling All It