Hu Corporation Has Two Operating Divisions,A and B Division B Uses the Type of Product Produced by Division

Hu Corporation has two operating divisions,A and B.The following information is provided for Division A: $\begin{array}{|l|lr|}\hline \text { Unit selling price } & \$ & 200 \\\hline \text { Unit variable costs } & \$ & 120 \\\hline \text { Unit fixed costs } & \$ & 40 \\\hline\end{array}$ 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 $180 to purchase the product from an outside source.If Division A sells internally it can save $5 per unit in variable costs.Assuming Division A is operating at capacity,what price should it charge Division B if the transfer is to be made?

A) $115
B) $195
C) $125
D) $200

Correct Answer:

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