Given the following information for Camping Division:
$$\begin{array} { l l }
\text { Selling price to outside customers } & \$ 50 \
\text { Variable cost per unit } & \$ 30 \
\text { Total fixed costs } & \$ 400,000 \
\text { Capacity in units } & 25,000
\end{array}$$
The Lantern Division would like to purchase internally from the Camping Division. The Lantern Division now purchases 5,000 units each period from outside suppliers at $49 per unit. The Camping Division has ample excess capacity to handle all of the Lantern Division's needs. What is the lowest price that the Camping Division could accept?
A) $50.00.
B) $49.00.
C) $46.00.
D) $30.00.

Question

Given the following information for Camping Division:
$$\begin{array} { l l } 
\text { Selling price to outside customers } & \$  50 \
\text { Variable cost per unit } & \$ 30 \
\text { Total fixed costs } & \$ 400,000 \
\text { Capacity in units } & 25,000
\end{array}$$
The Lantern Division would like to purchase internally from the Camping Division. The Lantern Division now purchases 5,000 units each period from outside suppliers at $49 per unit. The Camping Division has ample excess capacity to handle all of the Lantern Division's needs. What is the lowest price that the Camping Division could accept?
A) $50.00.
B) $49.00.
C) $46.00.
D) $30.00.

Quizplus · Accepted Answer

The lowest price the Camping Division could accept is the variable cost per unit, which is $30, since they have ample excess capacity and would not incur additional fixed costs.

Given the Following Information for Camping Division The Lantern Division Would Like to Purchase Internally from the l