Fraser Corporation's Western Division is currently purchasing a part from an outside supplier. The company's Eastern Division, which has excess capacity, makes and sells this part for external customers at a variable cost of $32 and a selling price of $44. If the Eastern Division begins sales to the Western Division, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $6. If sales to outsiders will not be affected, the Eastern Division would establish a transfer price of:

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The Answer of Fraser Corporation's Western Division is currently purchasing a part from an outside supplier. The company's Eastern Division, which has excess capacity, makes and sells this part for external customers at a variable cost of $32 and a selling price of $44. If the Eastern Division begins sales to the Western Division, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $6. If sales to outsiders will not be affected, the Eastern Division would establish a transfer price of:

Fraser Corporation's Western Division Is Currently Purchasing a Part from an Outside