Fois Company has two divisions, Division X and Division Y. Division X has a production capacity of 5,000 units of a particular part per month. Division X sells 4,400 units of the part each month to outside customers at a contribution margin of $56 per unit. Division Y would like to buy 800 units of the part each month from Division X. In computing the lowest acceptable transfer price from the perspective of the selling division, the lost contribution margin per unit portion of the transfer price computation would be:
A) $56.00 per unit
B) $30.00 per unit
C) $14.00 per unit
D) $25.00 per unit

Question

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The Answer of Fois Company has two divisions, Division X and Division Y. Division X has a production capacity of 5,000 units of a particular part per month. Division X sells 4,400 units of the part each month to outside customers at a contribution margin of $56 per unit. Division Y would like to buy 800 units of the part each month from Division X. In computing the lowest acceptable transfer price from the perspective of the selling division, the lost contribution margin per unit portion of the transfer price computation would be:
A) $56.00 per unit
B) $30.00 per unit
C) $14.00 per unit
D) $25.00 per unit

Fois Company Has Two Divisions, Division X and Division Y