Symonds Bendigo Division Purchases from an Outside Supplier for $52

Multiple Choice

Symonds Bendigo Division purchases from an outside supplier for $52 per unit. The company's Ballarat Division, which has no excess capacity, makes and sells the same part for external customers at a variable cost of $38 and a selling price of $58. If Ballarat commences sales to Bendigo it will (1) use the general rule and (2) be able to reduce the variable cost on internal transfers by $4. If external sales are not affected, Ballarat should establish a transfer price of:

A) $34
B) $38
C) $54
D) $58