Division 1 of Ace Company makes and sells wheels that can either be sold to outside customers or transferred to Division 2. The following data are available from last month:

Division 1:

Division 2:

If Division 1 sells the wheels to Division 2, Division 1 can avoid $2 per unit in sales commissions.

-Suppose that Division 1 sells 11,500 units each month to outside customers. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
A)$47.00 per unit
B)$43.50 per unit
C)$37.50 per unit
D)$34.73 per unit

Question

Division 1 of Ace Company makes and sells wheels that can either be sold to outside customers or transferred to Division 2. The following data are available from last month:

Division 1:

Division 2:

If Division 1 sells the wheels to Division 2, Division 1 can avoid $2 per unit in sales commissions.

-Suppose that Division 1 sells 11,500 units each month to outside customers. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
A)$47.00 per unit 
B)$43.50 per unit 
C)$37.50 per unit 
D)$34.73 per unit

Quizplus · Accepted Answer

The Answer is C

Division 1 of Ace Company Makes and Sells Wheels That