Given the Following Data for Division A: Assume That

question 3

Multiple Choice

Given the following data for Division A: Assume that Division A is selling all it can produce to outside customers.If it sells to Division B,$1 can be avoided in variable cost per unit.Division B is presently purchasing from an outside supplier at $38 per unit.From the point of view of the company as a whole,any sales to Division B should be priced at:

• A)$40.
• B)$39.
• C)$38.
• D)$37.
• E)The company would not want the transfer to take place.

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Definitions:

Face Value

The nominal value of a security stated by the issuer, also known as the “par value.”

Quoted Price

The current price at which an asset or service can be bought or sold on the market.

Selling

The process of offering goods or services to potential buyers in exchange for money or other compensation.

Interest Payable

The amount of interest expense that has been incurred but not yet paid by a company on its borrowings.