solution

The fastener division of Northern Textile Industries manufactures zippers and then sells them to customers for $8 per unit. Its variable cost is $3 per unit, and its fixed cost per unit is $1.50. Management would like the fastener division to transfer 12,000 of these zippers to another division within the company at a price of $3. The fastener division could avoid $0.25 per zipper of variable packaging costs by selling internally.

Determine transfer prices.

Instructions

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Determine the minimum transfer price (a) assuming the fastener division is not operating at full capacity, and (b) assuming the fastener division is operating at full capacity.

 
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