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In the Bombadier Company, Division a Has a Product That

question 89

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In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1 Case 2 Division A:  Capacity in units 100,000100,000 Number of units sold externally 100,00060,000 Market selling price $90$75 Variable costs per unit 7358 Fixed costs per unit based on capacity 1010 Division B: Number of units needed for production 40,00040,000 Purchase price per unit from external supplier $91$74\begin{array}{lrr}&\text {Case 1 }&\text {Case } 2\\\text { Division A: } & & \\\text { Capacity in units } & 100,000 & 100,000 \\\text { Number of units sold externally } & 100,000 & 60,000 \\\text { Market selling price } & \$ 90 & \$ 75 \\\text { Variable costs per unit } & 73 & 58 \\\text { Fixed costs per unit based on capacity } & 10 & 10\\\\\text { Division } B:\\\text { Number of units needed for production } & 40,000 & 40,000 \\\text { Purchase price per unit from external supplier } & \$ 91 & \$ 74\end{array} The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 1?

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Definitions:

GICs

Guaranteed Investment Certificates, fixed-term deposits offered by Canadian banks that guarantee a certain rate of return over a specified period.

Regulatory Approval

The official permission granted by governing bodies for a product or service to be legally sold or distributed.

Pharmaceutical Company

A company involved in the research, development, production, and marketing of drugs or pharmaceuticals.

Sales

The activities involved in selling goods or services in return for money or other compensation.

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