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

question 77

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 and if,by selling to Division Q,Division P could avoid $4 per unit in variable selling expense,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) $21 per unit
• C) $31 per unit
• D) $33 per unit

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Definitions:

Bank Interest Rates

The percentage charged on loans or paid on savings by banks to customers.

Short-Term Business Loans

Loans provided to businesses for immediate operational needs with repayment terms typically less than one year.

Late 1970s

A period marked by significant economic, political, and cultural changes, including inflation crises and the beginning of neoliberal policies in many countries.

Money Supply

The total fiscal reserves available in an economy, counting cash, coins, and the balances held across checking and savings accounts, at a particular time.