Homework answers / question archive / Fragmented Company has two divisions, A and B

Fragmented Company has two divisions, A and B

Accounting

Share With

Fragmented Company has two divisions, A and B. Division A makes a part that Division B currently purchases from an outside supplier for $80. Division B approaches Division A to purchase the product internally.
Cost information on this part for Division A is as follows:
Variable manufacturing cost : $60 per unit
Variable selling costs: $20 per part
Fixed costs: $15 per unit
Division A is operating at full capacity and sells all of its output to external customers for $102 per part.
Calculate the minimum amount that Division A would accept to transfer the part to Division B.