Operating at capacity pricing

Operating at capacity pricing

Horton Corporation has two operating divisions, A and B. The following information is provided for Division A:Unit selling price

$74

Unit variable costs

$42

Unit fixed costs

$22

Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $57 to
purchase the product from an outside source. If Division A sells internally it can save $7.0 per unit in variable costs. Assuming Division A is operating at
capacity, what price should it charge Division B if the transfer is to be made?

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