Using the formula in the text, if the lowest acceptable transfer price from the viewpoint of the selling division is $75 and the opportunity cost per unit on outside sales is $24, then the variable cost per unit must be:
A) $24 per unit
B) $99 per unit
C) $51 per unit
D) $75 per unit

Question

Quizplus · Accepted Answer

The formula for calculating the lowest acceptable transfer price from the viewpoint of the selling division is: variable cost + opportunity cost per unit.

Let's use the given values:
Lowest acceptable transfer price = $75
Opportunity cost per unit = $24

Substituting in the formula:
$75 = variable cost per unit + $24

Solving for the variable cost per unit:
Variable cost per unit = $75 - $24
Variable cost per unit = $51

Therefore, the variable cost per unit must be $51 per unit. Option C is the correct answer.

Using the Formula in the Text, If the Lowest Acceptable