Division G makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers$87Variable cost per unit$49Total fixed costs$40,000Capacity in units 4,000?Division H of the same company would like to use the part manufactured by Division G in one of its products. Division H currently purchases a similar part made by an outside company for $83 per unit and would substitute the part made by Division G. Division H requires 500 units of the part each period. Division G has ample capacity to produce the units for Division H without any increase in fixed costs and without cutting into sales to outside customers. If Division G sells to Division H rather than to outside customers, the variable cost be unit would be $2
lower. What should be the lowest acceptable transfer price from the perspective of Division G?
A. $57
B. $47
C. $83
D. $87
Answer: B
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