Sandpiper Inc.has a division that manufactures a component that sells for $150 and has a variable cost of $50.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $20.What is the minimum transfer price if the division is operating at capacity?
A) $150
B) $50
C) $70
D) $20

Question

Quizplus · Accepted Answer

The minimum transfer price when operating at capacity is the selling price of $150, as selling externally would not incur any additional costs and would utilize the full capacity profitably.