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 has 10,000 units available 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 Food Division should not accept a transfer price below its variable cost per unit, which is $55. This is because if it sells its product to the Restaurant Division for less than the variable cost, it will incur a loss. Therefore, the minimum transfer price the Food Division should accept is $55 per unit, which is the same as its variable cost per unit.

Management of the Catering Company Would Like the Food Division