How do I solve this problem ?
Division P of the Nyers Company makes a part that can either be sold to outsider customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows:
Annual production capacity 80,000 units
Selling Price of the item to outside customers $35
Variable Cost per unit $23
Fixed Cost per unit $5
Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. If outside customers demand only 50,000 units per year, then what is the lowest acceptable transfer price from the viewpoint of the selling division?
Division P of the Nyers Company makes a part that can either be sold to outsider customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows:
Annual production capacity 80,000 units
Selling Price of the item to outside customers $35
Variable Cost per unit $23
Fixed Cost per unit $5
Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. If outside customers demand only 50,000 units per year, then what is the lowest acceptable transfer price from the viewpoint of the selling division?