Division X of Operandi Corporation Makes and Sells a Single

question 113

Multiple Choice

Division X of Operandi Corporation makes and sells a single product which is used by manufacturers of fork lift trucks.Presently it sells 12,000 units per year to outside customers at $24 per unit.The annual capacity is 20,000 units and the variable cost to make each unit is $16.Division Y of Operandi Corporation would like to buy 10,000 units a year from Division X to use in its products.There would be no cost savings from transferring the units within the company rather than selling them on the outside market.What should be the lowest acceptable transfer price from the perspective of Division X?

• A) $24.00.
• B) $21.40.
• C) $17.60.
• D) $16.00.

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