Estes Company Has Two Operating Divisions,A and B Division B Uses the Type of Product Produced by Division

question 13

Multiple Choice

Estes Company has two operating divisions,A and B.The following information is provided for Division A: $\begin{array}{|l|lr|}\hline \text { Unit selling price } & \$ & 350 \\\hline \text { Unit variable costs } & \$ & 200 \\\hline \text { Unit fived costs } & \$ & 70 \\\hline\end{array}$ Division B uses the type of product produced by Division A and has approached Division A about buying the product internally.Division B is currently paying $300 to purchase the product from an outside source.If Division A sells internally it can save $10 per unit in variable costs.Assuming that Division A has sufficient excess capacity to produce all of the units requested by Division B,which of the following is the lowest price Division A should consider for the transfer?

• A) $300
• B) $190
• C) $260
• D) $250

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