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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 does NOT have any available capacity, 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 does NOT have any available capacity, the minimum transfer price it should accept is
A)$14.
B)$40.
C)$54.
D)$110.

Quizplus · Accepted Answer

When there is no available capacity, the minimum transfer price should be the market price, which is $110, as the division would forego external sales at this price.

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