Green Auto\'s Northern Division is currently purchasing a part from an outside s

Question

Green Auto's Northern Division is currently purchasing a part from an outside supplier. The company's Southern Division, which has no excess capacity, makes and sells this part for external customers at a variable cost of $12 and a selling price of $24. If Southern begins sales to Northern, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $3. On the basis of this information, Southern would establish a transfer price of:

$9.

$12.

$21.

$24.

None of these.

Explanation / Answer

Solution:-

$ 21.

Explanation:-

$ 24 - $ 3 = $ 21

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