solution
solution.
Assume the same information as question 7, except that the plastics division has available capacity of 10,000 units for plastic mouldings. What is the minimum transfer price that the plastics division should accept?
a. $10
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c. $40
d. $70
Question 7
The plastics division of Zekas Company manufactures plastic moulds and then sells them to customers for $70 per unit. Its variable cost is $30 per unit, and its fixed cost is $10 per unit. Management would like the division to transfer 10,000 of these moulds to another division within the company at a price of $40. The plastics division is operating at full capacity. What is the minimum transfer price that the plastics division should accept?
a. $10
b. $30
c. $40
d. $70
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