Estes Company Has Two Operating Divisions, a AndB A)$300
B)$190
C)$260
D)$250

Estes Company has two operating divisions, A andB. The following information is provided for Division A: 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 $300 to purchase the product from an outside source. If Division A sells internally it can save $10 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?
$$\begin{array} { | l | l r | } \hline \text { Unit selling price } & \$ & 350 \\\hline \text { Unit variable costs } & \$ & 200 \\\hline \text { Unit fixed costs } & \$ & 70 \\\hline\end{array}$$

A) $300
B) $190
C) $260
D) $250

Correct Answer:

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