Division S Sold a Part to Both Division P and Outside

question 41

Multiple Choice

Division S sold a part to both Division P and outside customers last year. The revenues from these sales were $30,000 (1,000 units) and $35,000 (1,000 units) , respectively. Next year, S plans to increase the unit sales price to $42 and wants a proportionate increase in the sales price to Division P. The unit costs are $9 variable and $15 fixed. If Division P does not agree to the price increase, 50% of Division S's fixed costs will be eliminated.
What is the highest price Division P would be willing to pay for external purchases?

• A) $30.00
• B) $36.00
• C) $16.50
• D) $28.50

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Definitions:

Primordial Earth

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