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

question 79

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 70,000 units,then according to the formula in the text,what is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by Q?

• A) $33 per unit
• B) $27 per unit
• C) $28 per unit
• D) $29 per unit

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Definitions:

Sponsoring Organization

An entity or group that supports a project or program, often providing funding or resources.

Contracts

Contracts are legally binding agreements between two or more parties that outline duties, rights, and conditions agreed upon by the parties.

Verbal Agreements

contracts or commitments made through spoken words rather than written documents.

Written Agreements

Formalized contracts or documents that outline the terms, conditions, and obligations agreed upon by two or more parties.