Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows: Annual production capacity 80,000unitsSelling price of the item to outside customers$35per unitVariable cost$23per unitAverage fixed cost$5per unit?Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently.?If outside customers demand 80,000 units and if, by selling to Division Q, Division P could avoid $4 per unit in variable selling expense, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
A. $33 per unit
B. $31 per unit
C. $35 per unit
D. $21 per unit
Answer: B
Business
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