Question

ABC Company has a division that manufactures a component that sells for $35 per unit, has variable cost of $15 per unit, and fixed cost of $5 per unit. Another division wants to purchase the component. What is the minimum transfer price if the division is operating at capacity?

Answer 1

Answer:

$35

Step-by-step explanation:

When the selling division is operating below capacity, the minimum transfer price is variable cost per unit and when the is operating at full capacity the the transfer price must be market based.

Transfer price = variable cost + contribution

= $15+($35-$15)

= $35