In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1 Case 2 Division A: Capacity in units 100,000 100,000 Number of units sold externally 100,000 60,000 Market selling price $90 $75 Variable costs per unit 73 58 Fixed costs per unit based on capacity 10 10 Division B: Number of units needed for production 40,000 40,000 Purchase price per unit from external supplier $86 $74 The company uses the opportunity cost approach to transfer pricing. What is the minimum transfer price in Case 1? a. $73 b. $86 c. $83 d. $90
The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 1?
a.$90
b.$73
c.$83
d.$91
The company uses the opportunity cost approach to transfer pricing. What is the minimum transfer price in Case 2?
a.$58
b.$75
c.$74
d.$68
The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?
a.$74
b.$58
c.$75
d.$68
The company uses the opportunity cost approach to transfer pricing.
Which case should not be transferred internally?
a.Both should be transferred internally.
b.Neither should be transferred internally.
c.Case 2
d.Case 1
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