Nelson Company's Radio Division currently is purchasing transistors from Charlotte Co. for $3.50 each. The total number of transistors needed is 8,000 per month. Nelson Company's Electronics Division can produce the transistors for a cost of $4.00 each, and it has plenty of capacity to manufacture the units. The $4.00 is made up of $3.25 in variable costs and $0.75 in allocated fixed costs. What should be the range of a possible transfer price?
A) $3.26 to $3.49
B) $3.51 to $3.99
C) $3.26 to $3.99
D) $3.25 to $3.50

Question

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The Answer of Nelson Company's Radio Division currently is purchasing transistors from Charlotte Co. for $3.50 each. The total number of transistors needed is 8,000 per month. Nelson Company's Electronics Division can produce the transistors for a cost of $4.00 each, and it has plenty of capacity to manufacture the units. The $4.00 is made up of $3.25 in variable costs and $0.75 in allocated fixed costs. What should be the range of a possible transfer price?
A) $3.26 to $3.49
B) $3.51 to $3.99
C) $3.26 to $3.99
D) $3.25 to $3.50

Nelson Company's Radio Division Currently Is Purchasing Transistors from Charlotte