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Concord Corporation manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other...

Concord Corporation manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 23000 units to the Production Division at 1050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $2850 and unit variable costs and fixed costs of $1050 and $1800, respectively. The Production Division is currently paying $2700 per unit to an outside supplier. $90 per unit can be saved on internal sales from reduced selling expenses. What is the minimum transfer price that the Engine Division should accept?

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Answer #1

Solution:

Unit Selling Price for Engine Division = $2,850
Less: Savings in Selling Cost = $90
Transfer Price = $2,760
Note: The engine division is currently Operating at full capacity

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