Division A is operating at 60 percent of its 400,000 unit capacity. Required:
1) What is the minimum transfer price Division A should charge for internal transfers?
2) What is the maximum price Division B would be willing to pay?
3) Why should Division A reduce its price to Division B?
Division A of Friedman Inc. transfers its product to Division B. Division B can either buy the item internally or externally (cost = $73 each). Division A has just completed its annual cost update as follows:

Question

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The Answer of Division A is operating at 60 percent of its 400,000 unit capacity. Required:
1) What is the minimum transfer price Division A should charge for internal transfers?
2) What is the maximum price Division B would be willing to pay?
3) Why should Division A reduce its price to Division B?
Division A of Friedman Inc. transfers its product to Division B. Division B can either buy the item internally or externally (cost = $73 each). Division A has just completed its annual cost update as follows:

Division a Is Operating at 60 Percent of Its 400,000