Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for $80.The Food Division sells the product to customers for $150 per unit.The Food Division's variable cost per unit is $55 and its fixed cost per unit is $25.The Food Division is currently operating at full capacity.What is the minimum transfer price the Food Division should accept?
A)$25
B)$55
C)$80
D)$150

Question

Quizplus · Accepted Answer

The minimum transfer price should be the market price of $150 since the Food Division is operating at full capacity and could sell the product to external customers for $150 per unit. Selling internally for less would mean forgoing the higher revenue they could earn on the open market.

Management of the Catering Company Would Like the Food Division