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Merkey Company Records Reveal the Following The Variable Costs of Division Y Will Be Incurred Whether

Question 33

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Merkey Company records reveal the following:  Division X Market price of finished component to outsiders $32 Variable costs per component 24 Contribution margin per component $8 Total contribution for 20,000 components $160,000\begin{array}{lr}\text { Division } \mathrm{X}\\\text { Market price of finished component to outsiders } & \$ 32 \\\text { Variable costs per component } & \underline{24} \\\text { Contribution margin per component } & \underline{\$ 8} \\\text { Total contribution for } 20,000 \text { components } & \$ 160,000\end{array}

 Division Y Sales price of finished product Variable costs: $42Division X 1 component @ $24)  Division Y $24 Assembly$9 Packaging41337Contribution margin per unit $5Total contribution for 20,000 units $100,000\begin{array}{ll}\text { Division Y }\\\text {Sales price of finished product Variable costs: } & &&\$42 \\\text {Division X 1 component @ \$24) } & \\\text {Division Y } & &\$24 \\\text { Assembly} & \$9 \\\text { Packaging} & 4&13&-37 \\\text {Contribution margin per unit } & &&\$5 \\\text {Total contribution for 20,000 units } & &&\$100,000 \\\end{array}
The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.If Division X is working at full capacity, the best transfer price from the viewpoint of the company as a whole would be _____.


A) $42
B) $24
C) $8
D) $32

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