Toldness Products, Inc., has a Connector Division that manufactures and sells a

Question

Toldness Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below:

Capacity in units 57,000

Selling price to outside customers $ 67

Variable cost per unit $ 22

Fixed cost per unit (based on capacity) $ 29

The Transmission Division is currently purchasing 11,000 of these connectors per year from an overseas supplier at a cost of $58 per connector. What is the maximum price that the Transmission Division should be willing to pay for connectors transferred from the Connector Division?

Multiple Choice $22 per unit

$58 per unit

$51 per unit

$29 per unit

Explanation / Answer

Maximum price that the Transmission Division should be willing to pay for connectors transferred = $58 per unit

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