Use the following information for questions
The Wood Division of Fir Products, Inc. manufactures rubber moldings and sells them externally for $55. Its variable cost is $25 per unit, and its fixed cost per unit is $7. Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $32.
-Assuming the Wood Division does not have any available capacity, the minimum transfer price it should accept is
A) $7.
B) $25.
C) $32.
D) $55.

Question

Use the following information for questions 
The Wood Division of Fir Products, Inc. manufactures rubber moldings and sells them externally for $55. Its variable cost is $25 per unit, and its fixed cost per unit is $7. Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $32.
-Assuming the Wood Division does not have any available capacity, the minimum transfer price it should accept is
A) $7.
B) $25.
C) $32.
D) $55.

Quizplus · Accepted Answer

The minimum transfer price the Wood Division should accept is $55, which is the external selling price. This is because the division does not have any available capacity, meaning any units transferred internally would displace external sales that could have been made at $55 per unit.

Use the Following Information for Questions