Division C Makes a Part That It Sells to Customers

question 2

Multiple Choice

Division C makes a part that it sells to customers outside of the company. Data concerning this part appear below: Division D of the same company would like to use the part manufactured by Division C in one of its products. Division D currently purchases a similar part made by an outside company for $79 per unit and would substitute the part made by Division C. Division D requires 1,000 units of the part each period. Division C has ample excess capacity to handle all of Division D's needs without any increase in fixed costs and without cutting into outside sales. What is the lowest acceptable transfer price from the standpoint of the selling division?

• A) $75
• B) $79
• C) $54
• D) $69

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Definitions:

Anesthetics

Drugs used during surgical procedures to induce a loss of sensation or consciousness, allowing for pain-free surgeries.

Childbirth

The process of labor leading to the delivery of a baby from the womb to the external world.

Brazelton Neonatal Behavioral Assessment Scale

A scale used to assess newborns' neurological development, reflexes, and reactions to people and objects.

Anoxia

A condition characterized by an absence of oxygen supply to an organ or tissue.