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Division x of charter corporation makes and sells a single product which is used by manufacturers of forklift trucks

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Division x of charter corporation makes and sells a single product which is used by manufacturers of forklift trucks. Presently, it sells 12,000 units per year to outside customers at $24 a unit. The annual capacity is 20,000 units and the variable cost to make each unit is $16. Division Y of Charter Corporation would like to buy 10,000 units a year form division X to use in it's products. There would be no cost saving from transferring the units within the company rather than selling them on the outside market. What should the lowest acceptable transfer price from the perspective of division X?

$24, $21.40, $17.60, or $16

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The expert examines the single product which is used by manufacturers of forklift trucks. Perspective divisions is examined.

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Division x of charter corporation makes and sells a single product which is used by manufacturers of forklift trucks. Presently, it sells 12,000 units per year to outside customers at $24 a unit. The annual capacity is 20,000 units and the variable cost to make ...

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Manal Elkhoshkhany, MBA
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  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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