Division A produces a part with the following characteristics
Capacity in units 500,000
Selling per unit. $450
Variable cost per unit. $200
Fixed cost per unit. $6
Division B, another division in the company, would like to buy this part from division A. Division B is presently purchasing the part from an outside source at $425 per unit
Required 1) What is the minimum price division A would sell to Division B assuming Divison A is currently operating at full capacity?
2) What is the price (range ) that division A would sell to Division B if it’s operating at less than full capacity? Explain.
Operating at Full Capacity Assignment
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