In the Ambros Company, Division a Has a Product That

question 93

Multiple Choice

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below:
$\begin{array}{lrr}\text { Division A: }&\text { Case } 1&\text { Case } 2\\\text { Capacity in units } & 100,000 & 100,000 \\\text { Number of units sold externally } & 100,000 & 60,000 \\\text { Market selling price } & \$ 90 & \$ 75 \\\text { Variable costs per unit } & 73 & 58 \\\text { Fixed costs per unit based on capacity } & 10 & 10\\\\\text { Division B: }\\\text {Number of units needed for production}&40,000&40,000\\ \text {Purchase price per unit from external supplier}&\$86&\$74\end{array}$

-Refer to the figure.The company uses the opportunity cost approach to transfer pricing.What is the minimum transfer price in Case 1?

• A)$73
• B)$83
• C)$86
• D)$90

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Definitions:

Corporate Career Backgrounds

The professional experiences and pathways within corporations that individuals have taken.

Entrepreneurial Venture

A startup or a new business established by an entrepreneur with the aim of seeking innovation, growth, and profit.

Minority-owned SMEs

Small and medium-sized enterprises that are owned and controlled by individuals from minority ethnic or racial groups.

Service-based Industry

An industry that focuses on providing services rather than producing physical goods, examples include healthcare, education, and information technology services.