In the Ambros Company,Division a Has a Product That Can

question 88

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: $\begin{array}{lrr}\text { Division A: }&\text { Case } 1&\text { Case } 2\\\text { Capacity in units } & 100,000 & 100,000 \\\text { Number of units sold externally } & 100,000 & 60,000 \\\text { Market selling price } & \$ 90 & \$ 75 \\\text { Variable costs per unit } & 73 & 58 \\\text { Fixed costs per unit based on capacity } & 10 & 10\\\\\text { Division B: }\\\text {Number of units needed for production}&40,000&40,000\\ \text {Purchase price per unit from external supplier}&\$91&\$74\end{array}$
The company uses the opportunity cost approach to transfer pricing.What is the maximum transfer price in Case 1?

• A)$73
• B)$83
• C)$90
• D)$91

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