The Post Division of the M

question 4

Multiple Choice

The Post Division of the M.T. Woodhead Company produces basic posts which can be sold to outside customers or sold to the Lamp Division of the M.T. Woodhead Company. Last year the Lamp Division bought all of its 25,000 posts from Post at $1.50 each. The following data are available for last year's activities of the Post Division: The total fixed costs would be the same for all the alternatives considered below.
-Suppose the transfers of posts to the Lamp Division cut into sales to outside customers by 15,000 units.What is the lowest transfer price that would not reduce the profits of the Post Division?

• A)$0.90
• B)$1.35
• C)$1.41
• D)$1.75

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