Frances Company's records reveal the following: Variable costs:
The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.Assume Division X has excess capacity.Division Y can buy the component from an outside supplier for $32 per unit.What is the lowest transfer price per unit at which Division X would be willing to sell to Division Y?
A)$8
B)$22
C)$24
D)$32

Question

Frances Company's records reveal the following:   Variable costs:
 The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.Assume Division X has excess capacity.Division Y can buy the component from an outside supplier for $32 per unit.What is the lowest transfer price per unit at which Division X would be willing to sell to Division Y?
A)$8 
B)$22 
C)$24 
D)$32

Quizplus · Accepted Answer

The lowest transfer price per unit at which Division X would be willing to sell to Division Y is the variable cost per unit, which is given as $24 in the information provided. This is because any transfer price lower than the variable cost would result in a loss for Division X. Therefore, option C is the correct choice.

Frances Company's Records Reveal the Following: Variable Costs