Company E is a large manufacturer that treats its divisions as profit centers. Division X produces an electronic component at the following costs: Variable production cost P80/unit Variable selling cost P10/unit Fixed cost (based on 10,000 units) P10/unit Division Y currently purchases a similar component from an outside supplier for P105/unit. It has determined that the component produced by Division X could be used instead with no adverse effects on the quality of the final product. Currently, Division X, which is operating at full capacity, sells all of its output to outside customers at P112/unit per component. What is the lowest price at which Division X would agree to transfer the component to Division Y?

Company E is a large manufacturer that treats its divisions as profit centers. Division X produces an electronic component at the following costs: Variable production cost P80/unit Variable selling cost P10/unit Fixed cost (based on 10,000 units) P10/unit Division Y currently purchases a similar component from an outside supplier for P105/unit. It has determined that the component produced by Division X could be used instead with no adverse effects on the quality of the final product. Currently, Division X, which is operating at full capacity, sells all of its output to outside customers at P112/unit per component. What is the lowest price at which Division X would agree to transfer the component to Division Y?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 4CMA: Morrisons Plastics Division, a profit center, sells its products to external customers as well as to...

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