Division A,which is operating at capacity,produces a component that it currently sells in a competitive market for $25 per unit.At the current level of production,the fixed cost of producing this component is $8 per unit and the variable cost is $10 per unit.Division B would like to purchase this component from Division A.The price that Division A should charge Division Y for this component is:

Question

Quizplus · Accepted Answer

Since Division A is operating at capacity and sells the component in a competitive market for $25 per unit, it should charge Division B the same market price of $25 per unit to ensure it does not lose potential revenue.

Division A,which Is Operating at Capacity,produces a Component That It