The National Division of RedBubble Ltd is buying 10,000 widgets from an outside supplier at $30 per unit. RedBubble's Overseas Division, which is producing and selling at full capacity (12,000 units), has the following sales and cost structure: $\begin{array}{llcc}
\text { Sales price per unit } &\$45.00 \
\text { Variable costper unit } &22.50\
\text {Fixed cost (at capacity) per unit } &15.00\
\end{array}$

If the National Division buys its 10,000 widgets from the Overseas Division, the transfer price should be:
A) $30.00
B) $22.50
C) $45.00
D) $37.50

Question

The National Division of RedBubble Ltd is buying 10,000 widgets from an outside supplier at $30 per unit. RedBubble's Overseas Division, which is producing and selling at full capacity (12,000 units), has the following sales and cost structure: $\begin{array}{llcc}
  \text { Sales price per unit } &\$45.00  \
 \text { Variable costper unit } &22.50\
 \text {Fixed cost (at capacity) per unit  } &15.00\
\end{array}$

If the National Division buys its 10,000 widgets from the Overseas Division, the transfer price should be:
A) $30.00
B) $22.50
C) $45.00
D) $37.50

Quizplus · Accepted Answer

The Answer of The National Division of RedBubble Ltd is buying 10,000 widgets from an outside supplier at $30 per unit. RedBubble's Overseas Division, which is producing and selling at full capacity (12,000 units), has the following sales and cost structure: $\begin{array}{llcc}
  \text { Sales price per unit } &\$45.00  \
 \text { Variable costper unit } &22.50\
 \text {Fixed cost (at capacity) per unit  } &15.00\
\end{array}$

If the National Division buys its 10,000 widgets from the Overseas Division, the transfer price should be:
A) $30.00
B) $22.50
C) $45.00
D) $37.50

The National Division of RedBubble Ltd Is Buying 10,000 Widgets