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What bravo transfer price to alpha will be

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Question 1: A company has two divisions, Alpha and Bravo. Alpha is currently buying a part from an outside supplier. Bravo, which has excess capacity, makes and sells the part to outside customers at a selling price of $33 and a variable cost of $21. If Bravo begins selling the part to Alpha, it will use the general transfer pricing rule and be able to reduce its variable cost on internal transfers by $4. Given this data, if sales to outsiders will not be affected, Bravo's transfer price to Alpha will be:

Option 1: $17.

Option 2: $21.

Option 3: $29.

Option 4: $33.

Option 5: None of the answers is correct.

Reference no: EM132529385

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