Use the following to answer questions:
Vallarta Inc. has two divisions, P and Q, with the following information:

The variable cost of Division Q will be incurred regardless of where it purchases the components, internally or externally.
-If Division P has excess capacity, ____ is the lowest transfer price it would be willing to accept from Division Q.
A) $25
B) $30
C) $38
D) $70

Question

Use the following to answer questions:
Vallarta Inc. has two divisions, P and Q, with the following information:
  
The variable cost of Division Q will be incurred regardless of where it purchases the components, internally or externally.
-If Division P has excess capacity, ____ is the lowest transfer price it would be willing to accept from Division Q.
A) $25 
B) $30 
C) $38 
D) $70

Quizplus · Accepted Answer

If Division P has excess capacity, the lowest transfer price it would be willing to accept is the variable cost per unit, which is $25.

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