Division P of the Nyers Company Makes a Part That

question 64

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 only 50,000 units per year, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?

• A) $35 per unit
• B) $33 per unit
• C) $28 per unit
• D) $23 per unit

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Definitions:

Job Cost Sheet

A form prepared for a job that records the materials, labor, and manufacturing overhead costs charged to that job.

Production Reports

Production reports are documents that provide information on the status, output, and efficiency of the production process within a manufacturing operation.

Process Costing

A costing method used for homogeneous products, dividing total costs by the number of units produced to calculate cost per unit.

Homogeneous

Characterized by uniformity or similarity in composition, nature, or character, often used in reference to materials or mixtures.