Holiday Corp.has two divisions,Quail and Marlin.Quail produces a widget that Marlin could use in its production.Quail's variable costs are $4 per widget while the full cost is $7.Widgets sell on the open market for $12 each.If Quail is operating at capacity,what would be the minimum transfer price if Marlin currently is purchasing 100,000 units on the open market?
A)$4.00
B)$5.00
C)$7.00
D)$12.00

Question

Quizplus · Accepted Answer

Since Quail is operating at capacity, the minimum transfer price would be the market price of $12, as selling internally would mean forgoing sales in the open market at that price.