Division a Makes a Part That It Sells to Customers

question 170

Multiple Choice

Division A makes a part that it sells to customers outside of the company.Data concerning this part appear below: Division B of the same company would like to use the part manufactured by Division A in one of its products.Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A.Division B requires 5,000 units of the part each period.Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers.If Division A sells to Division B rather than to outside customers,the variable cost be unit would be $1 lower.What is the lowest acceptable transfer price Division A should accept?

• A)$40
• B)$38
• C)$30
• D)$29
• E)$10

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Definitions:

Plastic Bag

A flexible, thin container made of plastic, often used for carrying or storing items, and a significant contributor to plastic pollution if not disposed of properly.

Sterile Gown

Protective attire worn by medical staff during procedures to maintain a sterile environment and prevent contamination.

Perioperative Area

The region or set of rooms in a healthcare facility used for patients undergoing surgical procedures, including pre-operatory, operatory, and post-operatory spaces.

Surgical Technologist

A healthcare professional who assists in surgical operations, ensuring that the procedure goes smoothly by preparing and organizing equipment and assisting surgeons.