In the Bombadier Company, Division a Has a Product That

question 9

Multiple Choice

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: $\begin{array}{lrr}&\text {Case 1 }&\text {Case } 2\\\text { Division A: } & & \\\text { Capacity in units } & 100,000 & 100,000 \\\text { Number of units sold externally } & 100,000 & 60,000 \\\text { Market selling price } & \$ 90 & \$ 75 \\\text { Variable costs per unit } & 73 & 58 \\\text { Fixed costs per unit based on capacity } & 10 & 10\\\\\text { Division } B:\\\text { Number of units needed for production } & 40,000 & 40,000 \\\text { Purchase price per unit from external supplier } & \$ 91 & \$ 74\end{array}$ The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?

• A)$75
• B)$68
• C)$74
• D)$58

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