(Appendix 11A) Division P of the Nyers Company Makes a Part

question 35

Multiple Choice

(Appendix 11A) Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows:
Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently.
-If outside customers demand 80,000 units,then according to the formula in the text,what is the lowest acceptable transfer price from the viewpoint of the selling division?

• A) $35 per unit
• B) $33 per unit
• C) $28 per unit
• D) $23 per unit

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Definitions:

Investing Activity

Financial transactions related to an entity's investments in long-term assets, including property, plant, equipment, and securities.

Capital Stock

The total amount of common and preferred shares that a company is authorized to issue, representing the equity ownership of the company.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's profits, and distributed proportionally to the amount of shares owned.

Financing Activity

Transactions with lenders or investors that involve borrowing funds, repaying loans, obtaining equity capital, and paying dividends.