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The Wood Division of Fir Products, Inc.manufactures wood mouldings and sells them externally for $110.Its variable cost is $40 per unit, and its fixed cost per unit is $14.Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $54.
-Assuming the Wood Division has available capacity of 5,000 units, the minimum transfer price it should accept is
A)$14.
B)$40.
C)$54.
D)$110.

Question

Use the following information for questions 
The Wood Division of Fir Products, Inc.manufactures wood mouldings and sells them externally for $110.Its variable cost is $40 per unit, and its fixed cost per unit is $14.Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $54.
-Assuming the Wood Division has available capacity of 5,000 units, the minimum transfer price it should accept is
A)$14.
B)$40.
C)$54.
D)$110.

Quizplus · Accepted Answer

The minimum transfer price should cover the variable cost of $40 per unit, as fixed costs are already covered by other sales and the division has available capacity.

Use the Following Information for Questions