Division P of the Nyers Company Makes a Part That

question 30

Multiple Choice

Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows: Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently.
If outside customers demand 70,000 units, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by Q?

• A) $33 per unit
• B) $27 per unit
• C) $28 per unit
• D) $29 per unit

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Definitions:

Mediastinum

The central compartment of the thoracic cavity between the lungs, containing the heart, trachea, esophagus, and other structures.

Thoracic Cavity

The part of the body enclosed by the ribs, home to organs such as the heart and lungs.

Diaphragm

A large, dome-shaped muscle located below the lungs that plays a key role in breathing.

Aspiration

The act of drawing in or out using a sucking motion, often refers to the medical procedure of removing substances from the body.