The Post Division of the M $\$ 1.50$ Each the Following Data Are Available for Last Year's Activities

question 88

Multiple Choice

The Post Division of the M.T. Woodhead Company produces basic posts that can be sold t outside customers or sold to the Lamp Division of the M.T. Woodhead Company. Last year the Lamp Division bought all of its 25,000 posts from the Post Division at $\$ 1.50$ each. The following data are available for last year's activities of the Post Division:
$\begin{array}{|l|r|}\hline \text { Capacity in Units } & 300,000 \text { posts } \\\hline \text { Selling Price per Post to Outside Customers } & \$ 1.75 \\\hline \text { Variable Costs per Post } & \$ 0.90 \\\hline \text { Fixed Costs, Total } & \$ 150,000 \\\hline\end{array}$
$\text { The total fixed costs would be the same for all the alternatives considered below. }$
- Suppose the transfer of posts to the Lamp Division will cut into sales to outside customers by 15,000 units.What is the lowest transfer price that would not reduce the operating income of the Post Division?

• A) $0.90.
• B) $1.35.
• C) $1.41.
• D) $1.75.

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