mework windshields for use in Fast Car\'s Assembly division. The Windshield divi

Question

mework windshields for use in Fast Car's Assembly division. The Windshield division incurs The Windshieid division of Fast Car Co. makes variable costs of $232 per windshield and has capacity to make 570,000 windshields per year The market price is $555 per windshield. The Windshield division Incurs total fixed costs of $4,000,000 per year Assume the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Reference ieks Prex7 of t0 Next> MacBook Air 8

Explanation / Answer

Transfer Pricing :

If transferor division has excess capacity then minimum transfer price will be variable cost of transferor division but if Transferoro division has not excess capacity then minimum transfer price will be variable cost plus contribution to be lost...

so in this question Windshield division has excess capacity so minimum transfer price will be variable cost of windshield division..

Transfer price per windshield will be at lease $232 but not more than $555

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