Division T of Clocker Company makes a timer which it sells for $30 to outside customers. The division has supplied the following data concerning the timer:

Division S of Clocker Company is currently buying 5,000 similar timers each month from an overseas supplier at $27 each. Division S would like to acquire its timers from Division T if the price is right.
-Suppose that Division T can sell only 10,000 timers to outside customers. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
A)$24 per timer
B)$27 per timer
C)$30 per timer
D)$15 per timer

Question

Division T of Clocker Company makes a timer which it sells for $30 to outside customers. The division has supplied the following data concerning the timer:

Division S of Clocker Company is currently buying 5,000 similar timers each month from an overseas supplier at $27 each. Division S would like to acquire its timers from Division T if the price is right.
-Suppose that Division T can sell only 10,000 timers to outside customers. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
A)$24 per timer 
B)$27 per timer 
C)$30 per timer 
D)$15 per timer

Quizplus · Accepted Answer

The Answer is A

Division T of Clocker Company Makes a Timer Which It