Part AR3 Costs the Southwestern Division of Luxon Corporation $26

question 154

Multiple Choice

Part AR3 costs the Southwestern Division of Luxon Corporation $26 to make-direct materials are $10, direct labor is $4, variable manufacturing overhead is $9, and fixed manufacturing overhead is
$3) Southwestern Division sells Part AR3 to other companies for $30. The Northeastern Division of Luxon Corporation can use Part AR3 in one of its products. The Southwestern Division has enough idle capacity to produce all of the units of Part AR3 that the Northeastern Division would require. What is the lowest transfer price at which the Southwestern Division should be willing to sell Part AR3 to the Northeastern Division?

• A) $23
• B) $27
• C) $21
• D) $26
• E) $30

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