Mazuka,Inc.has a division that manufactures a component that sells for $165 and has a variable cost of $35.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $22.What is the transfer price if the division is operating at full capacity?
A) $57
B) $187
C) $165
D) $22

Question

Quizplus · Accepted Answer

When operating at full capacity, the transfer price should be the market price, which is $165, to reflect the opportunity cost of selling externally.