Estes Company Has Two Operating Divisions, a AndB A)$300
B)$190
C)$260
D)$250

question 77

Multiple Choice

Estes Company has two operating divisions, A andB. The following information is provided for Division A: 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?
$$\begin{array} { | l | l r | } \hline \text { Unit selling price } & \$ & 350 \\\hline \text { Unit variable costs } & \$ & 200 \\\hline \text { Unit fixed costs } & \$ & 70 \\\hline\end{array}$$

• A)$300
• B)$190
• C)$260
• D)$250

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Definitions:

Tidal Volume

The volume of air moved into or out of the lungs during a normal breath.

Inspiratory Reserve Volume

The additional air that can be forcibly inhaled after the inspiration of a normal tidal volume, reflecting lung capacity.

Expiratory Reserve Volume

The additional amount of air that can be forcibly exhaled after the completion of a normal, quiet expiration.

Single Breath

A process of inhaling once then exhaling, often used in respiratory testing to assess lung function and capacity.