Question

Division A has variable manufacturing costs of $53 per unit and fixed costs of $14 per unit. Assuming that Division A is operating at capacity, what is the optimal transfer price of an internal transfer when the market price is $80? O $28. O $27. OO

Answer 1

Answer- The optimal transfer price of an internal transfer = $80 per unit.

Explanation- Division A is operating at capacity hence optimal transfer price = Variable manufacturing costs per unit+ Opportunity costs per unit

= $53 per unit+ ($80 per unit-$53 per unit)

= $53 per unit+$27 per unit

= $80 per unit