Division A of Dymocks Ltd has operating data as follows: $\begin{array}{llcc}
\text { Capacity} & \text { 20,000 units } \
\text { Selling price }& \text {\$ 80 per unit }\
\text { Variable costs} & \text { \$ 45 per unit }\
\text {Fixed costs } & \text { \$ 20 per unit }\
\end{array}$

B wants to purchase units from Division
A If Division A agrees to sell units to Division B, A's variable costs will be $5 less per unit. If Division A has capacity available to meet B's requirements, what is the minimum price it should charge?
A) $75
B) $20
C) $40
D) $60

Question

Division A of Dymocks Ltd has operating data as follows: $\begin{array}{llcc}
  \text {  Capacity} &  \text { 20,000 units }  \
 \text { Selling price }& \text {\$ 80 per unit  }\
 \text {  Variable costs} & \text { \$ 45 per unit }\
 \text {Fixed costs  } & \text { \$ 20 per unit }\
\end{array}$

B wants to purchase units from Division
A If Division A agrees to sell units to Division B, A's variable costs will be $5 less per unit. If Division A has capacity available to meet B's requirements, what is the minimum price it should charge?
A) $75
B) $20
C) $40
D) $60

Quizplus · Accepted Answer

The minimum price should cover the variable costs. With a $5 reduction, the variable cost becomes $40 per unit.

Division a of Dymocks Ltd Has Operating Data as Follows