Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 41

Division A manufactures an aircraft engine component with unit variable product cost of $38 and market price of $50. Division A incurs shipping costs of $3 per unit for sales to outside parties only. Division B uses this component in the manufacture of its own engine production activities. Top management allows negotiated transfer pricing. Refer to the information above. If Division A is operating at less than full capacity, the minimum transfer price (the floor of the bargaining range) is
A) $38.
B) $50.
C) $44.
D) $47.
E) There is no bargaining range.