The Wood Division of Fir Products, Inc. manufactures wood moldings and sells the

Question

The Wood Division of Fir Products, Inc. manufactures wood moldings and sells them externally for $165. Its variable cost is $75 per unit, and its fixed cost per unit is $21. Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $96.

Q: Assuming the Wood Division has available capacity of 5,000 units, the minimum transfer price it should accept is: A) $96 B) $165 C) $75 D) $21???
Q: Assuming the Wood Division does not have any available capacity, the minimum transfer price it should accept is: A) $96 B) $165 C) $75 D) $21???

Explanation / Answer

A)since they have the capacity they should sell it at $75+$21=$96 B)but,if they dont dont have the capacity to produce they have to sell at $165.

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