Using the formula in the text, if the lowest acceptable transfer price from the viewpoint of the selling division is $73 and the opportunity cost per unit on outside sales is $29, then the variable cost per unit must be:
A) $73 per unit
B) $29 per unit
C) $44 per unit
D) $102 per unit

Question

Quizplus · Accepted Answer

The formula for determining the lowest acceptable transfer price is:

Minimum transfer price = Variable cost per unit + Opportunity cost per unit

We are given that the lowest acceptable transfer price from the viewpoint of the selling division is $73 and the opportunity cost per unit on outside sales is $29.

Plugging these numbers into the formula, we get:

$73 = Variable cost per unit + $29

Solving for variable cost per unit, we get:

Variable cost per unit = $73 - $29 = $44

Therefore, the variable cost per unit must be $44.

Using the Formula in the Text, If the Lowest Acceptable