Ebbs Products, Incorporated, Has a Motor Division That Manufactures and Sells

Multiple Choice

Ebbs Products, Incorporated, has a Motor Division that manufactures and sells a number of products, including a standard motor. Data concerning that motor appear below: The Automotive Division of Ebbs Products, Inc needs 9,000 special heavy-duty motors per year. The Motor Division's variable cost to manufacture and ship this special motor would be $46 per unit. Because these special motors require more manufacturing resources than the standard motor, the Motor Division would have to reduce its production and sales of standard motors to outside customers from 86,000 units per year to 72,500 units per year.From the standpoint of the Motor Division, what is the minimal acceptable transfer price for the special motors for the Automotive Division?

A) $84.00 per unit
B) $103.00 per unit
C) $81.00 per unit
D) $64.00 per unit