Since the Pillar Division has excess operating capacity, the opportunity cost is ze

The Pillar Division of the Gothic Building Company produces basic pillars which can be sold to outside customers or sold t

Capacity in units 335,000 pillars

Selling pri $ 2
Variable co$ 1
Fixed costs$ 170,000

The total fixed costs would be the same for all the alternatives considered below.

Suppose there is ample capacity so that transfers of the pillars to the Lantern Division do not cut into sales to outside cus
$2.75.
$1.00.
$1.75.
$2.00.
pportunity cost is zero. Therefore, the Pillar Division's profits would not be reduced if the

o outside customers or sold to the Lantern Division of the Gothic Company. Last year, the Lantern Division bought all of its 25,000 pill

t cut into sales to outside customers. What is the lowest transfer price that would not reduce the profits of the Pillar Division?
ot be reduced if the transfer price is at least the variable cost of $ 1.00 per unit.

on bought all of its 25,000 pillars from Pillar at $1.75 each. The following data are available for last year's activities of the Pillar Division

of the Pillar Division?

00 per unit.

activities of the Pillar Division: