Buchmiller Company's records reveal the following:
The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.
-If Division X is working at full capacity, the best transfer price from the viewpoint of the company as a whole would be

Question

Buchmiller Company's records reveal the following:
   The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.
-If Division X is working at full capacity, the best transfer price from the viewpoint of the company as a whole would be

Quizplus · Accepted Answer

To determine the best transfer price from the viewpoint of the company as a whole, we need to consider the opportunity cost of selling internally versus externally. If Division X is working at full capacity, then any units transferred to Division Y would result in losing the selling price of those units to an external customer. Therefore, the transfer price should be set at the selling price to an external customer, which is $50. This ensures that the company as a whole maximizes its profits.

Buchmiller Company's Records Reveal the Following