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Division M makes a part that it sells to customers outside of the company. Data concerning this part appear below:
Division M makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers $75 Variable cost per unit $50 Total fixed costs $400,000 Capacity in units 25,000 Division O of the same company would like to use the part manufactured by Division M in one of its products. Division O currently purchases a similar part made by an outside company for $70 per unit and would substitute the part made by Division M. Division O requires 5,000 units of the part each period. Division M can sell every unit it produces on the outside market. What should be the lowest acceptable transfer price from the perspective of Division O?
