The Silver Coast Division of Harvey Ltd produces and sells a product to outside and internal customers. Per-unit data collected from its operations include: $\begin{array}{llcc}
\text { Outside salesprice} &\$640 \
\text { Direct materials } &105\
\text { Direct labour } &250\
\text {Fixed overhead } &180\
\end{array}$

If the Silver Coast division is operating at full capacity and selling solely to outside customers, what price should another division pay for Silver Coast's product?
A) $625
B) $640
C) $285
D) $480

Question

The Silver Coast Division of Harvey Ltd produces and sells a product to outside and internal customers. Per-unit data collected from its operations include: $\begin{array}{llcc}
  \text {  Outside salesprice} &\$640  \
 \text { Direct materials } &105\
 \text { Direct labour } &250\
 \text {Fixed overhead  } &180\
\end{array}$

If the Silver Coast division is operating at full capacity and selling solely to outside customers, what price should another division pay for Silver Coast's product?
A) $625
B) $640
C) $285
D) $480

Quizplus · Accepted Answer

When operating at full capacity and selling solely to outside customers, the price another division should pay for Silver Coast's product is the outside sales price, which is $640. This ensures the selling division does not lose revenue from selling internally versus externally.

The Silver Coast Division of Harvey Ltd Produces and Sells