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Division A produces a part with the following characteristics: Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $28 per unit. If Division A sells to Division B, $1 in variable costs can be avoided.
-Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into its sales to outside customers.From the point of view of Division A,any sales to Division B should be priced no lower than:
Labor Efficiency Variance
The difference between the actual labor hours used and the standard labor hours expected for the level of production achieved, indicating labor productivity.
Labor Rate Variance
The difference between the actual cost of labor and the budgeted or standard cost, indicating efficiency or inefficiency in workforce use.
November
The eleventh month of the year in the Gregorian calendar, characterized by the transition from fall to winter in many regions.
Standard Cost
A predetermined cost of manufacturing, used for budgeting and assessing performance.
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