Division A, Which Is Operating at Capacity, Produces a Component

question 125

Multiple Choice

Division A, which is operating at capacity, produces a component that currently sells in a competitive market for $25 per unit. At the current level of production, the fixed cost of producing this component is $8 per unit and the variable cost is $10 per unit. Division B would like to purchase this component from Division A. The price that Division A should charge Division B for this component is:

• A) $10 per unit.
• B) $18 per unit.
• C) $20 per unit.
• D) $25 per unit.
• E) $35 per unit.