Estes Company Has Two Operating Divisions,A and B $\begin{array}{lrr} \text {Unit selling price } &\$350\\ \text { Unit variable costs} &\$200\\ \text { Unit fixed costs} &\$70\\\end{array}$

question 63

Multiple Choice

Estes Company has two operating divisions,A and B.The following information is provided for Division A: $\begin{array}{lrr} \text {Unit selling price } &\$350\\ \text { Unit variable costs} &\$200\\ \text { Unit fixed costs} &\$70\\\end{array}$
Division B uses the type of product produced by Division A and has approached Division A about buying the product internally.Division B is currently paying $300 to purchase the product from an outside source.If Division A sells internally,it can save $10 per unit in variable costs.Assuming that Division A has sufficient excess capacity to produce all of the units requested by Division B,which of the following is the lowest price Division A should consider for the transfer?

• A) $300
• B) $190
• C) $260
• D) $250

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Definitions:

Massachusetts Bay Colony

An early English settlement established in 1630 in present-day Massachusetts, it was a major center for Puritanism and early American colonial life.

John Winthrop

A leading figure in founding the Massachusetts Bay Colony, one of the early English settlements in North America, and a key promoter of the concept of a "city upon a hill."

Divine Retribution

The concept of a supernatural force, usually a deity, exacting justice by rewarding the good and punishing the wicked according to moral criteria.

English Settlers

English settlers were individuals or groups from England who migrated to various parts of the world, notably to the Americas during the 17th and 18th centuries, to establish colonies.