Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for $30.The Food Division sells the product to customers for $70 per unit.The Food Division's variable cost per unit is $35 and its fixed cost per unit is $10.
-If the Food Division is currently operating at full capacity, what is the minimum transfer price the Food Division should accept?

Question

Quizplus · Accepted Answer

When operating at full capacity, the minimum transfer price should be the market price of $70, as selling internally would mean forgoing external sales at this price.

Management of the Catering Company Would Like the Food Division