Question

Penn Company has a division that manufactures a component that sells for $ 50 and has variable costs of $ 25 and fixed costs of $ 10$ Another division wants to purchase the component. What is the minimum transfer price if the division is operating at​ capacity?
A $10
B. $25
C. $35
D. $50

Answer 1

Answer:

C. $35

Explanation:

Given;

Selling price of the manufactured component = $ 50

Variable costs of production = $ 25

Fixed costs of Production = $ 10

If the component is to be sold to another division, the minimum sales price is equivalent to the total production cost of the transferring division

= $ 25 + $ 10

= $ 35

The minimum transfer price if the division is operating at​ capacity is $35.