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 has 10,000 units available capacity, what is the minimum transfer price the Food Division should accept?

Question

Quizplus · Accepted Answer

The minimum transfer price should cover the variable cost per unit, which is $35, since the Food Division has available capacity and would not incur additional fixed costs.

Management of the Catering Company Would Like the Food Division