14) The West and East Divisions are divisions in the samecompany. Currently the East Division buys a part from West Divisionfor $384 per unit. The West Division wants to increase the price ofthe part it sells to East Division by $96 to $480. The manager ofthe East Division has stated that he cannot pay that much insofaras the division’s profit goes below zero. The manager of the EastDivision can buy the part from an outside supplier for $448 perunit. The cost data pertaining to the part is supplied by the WestDivision: Directmaterials $136 Directlabor 200 Variableoverhead 40 Fixedoverhead 42 If West Division does not produce the parts for the EastDivision, it will be able to avoid one-third of the fixedmanufacturing overhead costs. The West Division has excess capacitybut no alternative uses for the facilities. West Division normallysells the part outside the company for $400 per unit. What is theminimum transfer price per unit that West Division should chargeEast Division? A) $376 B) $390 C) $400 D) $448 Answer: B Why the answer is B..?……..I need explanation for that and ifB) $390 minimum transfer price what is themaximum? ….thank you . . .
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