Figure 20-5
Allied Industries has two divisions: the Bradley Division and the Rommel Division. Information about the component that the Bradley Division produces is as follows: $\begin{array}{lr}
\text { Sales } & £ 180 \text { per unit } \
\text { Variable manufacturing costs } & £ 80 \text { per unit } \
\text { Fixed manufacturing overhead } & £ 50 \text { per unit } \
\text { Expected sales in units } & 10,000 \text { units }
\end{array}$ The Bradley Division can produce up to 12,000 components per year. The Rommel Division needs 800 units of the component for a product it manufactures.
-Refer to Figure 20-5. If the selling division did NOT have excess capacity, the minimum transfer price the selling division would be willing to accept would be

Question

Quizplus · Accepted Answer

Without excess capacity, the selling division would not want to sell for less than the market price of £180 per unit, as each unit sold internally would potentially displace a unit that could be sold externally at the full price.

Figure 20-5 Allied Industries Has Two Divisions: the Bradley Division

Figure 20-5
Allied Industries Has Two Divisions: the Bradley Division