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, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
A. $28 per unit
B. $23 per unit
C. $35 per unit
D. $33 per unit
Answer: C
Business
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