The Molding Division of Cotwold Company manufactures a plastic casing used by th

Question

The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $34 per unit Variable costs for the casing are $21 per unit and fixed cost is $5 per unit. Cotwold executives would like for the Molding Division to transfer 17,000 units to the Assembly Division at a price of $25 per unit. Assume that the Molding Division is operating at full capacity Required: 1. Should it accept the transfer price proposed by management? O Yes O No 2. Identify the minimum transfer price thet the Molding Division will accept inimum Price

Explanation / Answer

1 No, as it reduce income of Molding division 2 Minimum price =$34

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