Edwards Company has two operating divisions, A and B. The following information

Question

Edwards Company has two operating divisions, A and B. The following information is provided for Division A: Unit selling price $156 Unit variable costs $106 Unit fixed costs $ 26 Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $151 to purchase the product from an outside source. If Division A sells internally it can save $13.0 per unit in variable costs. Assuming that Division A has sufficient excess capacity to produce all of the units requested by Division B, which of the following is the lowest price Division A should consider for the transfer?

a. 106.00

b. 143.00

c. 151

d. 93

Explanation / Answer

D. 93

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