Homework Answers
Part 1)
The correct answer is NO
It should not accept the transfer price proposed by the management, as it will lead to loss to the molding division as it is operating at full capacity.
Part 2)
Minimum transfer price = $ 30
Explanation and calculation
Minimum transfer price = variable costs + contribution loss
= $ 17 + (30-17)
= 17 + 13
= $ 30
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