Part 7B costs the Midwest Division of Frackle Corporation $30 to make,of which $21 is variable.Midwest Division sells Part 7B to other companies for $47.The Northern Division of Frackle Corporation can use Part 7B in one of its products.The Midwest Division has enough idle capacity to produce all of the units of Part 7B that the Northern Division would require.What is the lowest transfer price at which the Midwest Division should be willing to sell Part 7B to the Northern Division?

A) $30
B) $21
C) $47
D) $17
E) $20

Question

Maher Bakhsh · Accepted Answer

Final Answer : B, Explanation :  The lowest transfer price at which the Midwest Division should be willing to sell Part 7B to the Northern Division is $21, which represents the variable cost. This ensures that the Midwest Division covers its variable costs associated with producing Part 7B.

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