Fregozo Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: Capacity in units 58,000Selling price to outside customers$54Variable cost per unit$20Fixed cost per unit (based on capacity)$21?The Transmission Division is currently purchasing 8,000 of these connectors per year from an overseas supplier at a cost of $45 per connector.?Assume that the Connector Division has enough idle capacity to handle all of the Transmission Division's needs. What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?
A. $41 per unit
B. $54 per unit
C. $20 per unit
D. $45 per unit
Answer: C
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