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Managerial Accounting

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Moderate

Transfer Decision - Full Capacity

MGRACT-LGAJEW

Londe Co. has two divisions, A and B. For one of the company's products, Division A produces a subassembly and Division B incorporates this subassembly into the final product. There is a market for both the subassembly and the final product. There is no excess capacity in Division A (i.e., all subassemblies can be sold outside). The following information is available:

Estimated selling price for final product -- \$400 per unit
Average market price for subassembly -- \$300 per unit
Variable cost in Division A -- \$200 per unit
Additional variable cost for completion in Division B -- \$250 per unit

If transfers are ma​de to Division B, the company would be:

A

Worse off by \$150 per unit

B

Worse off by \$50 per unit

C

Better off by \$150 per unit

D

Better off by \$50 per unit