Question

The Plastics Division of Weston Company manufactures plastic molds and then sells them for $70 per unit. Its variable cost is $30 per unit, and its fixed cost per unit is $10. Management would like the Plastics Division to transfer 10,000 of these molds to another division within the company at a price of $40. The Plastics Division is operating at full capacity. What is the minimum transfer price that the Plastics Division should accept?

Answer 1

Answer:

The right solution is "$30".

Explanation:

• Unless the Plastic Division requires additional production, the Plastic Division would at minimum try to offset its operating expenses even though they have excess extra units which offer.  
• The variable price seems to be $30 per item, so $30 seems to be the minimum determine the prevalence or transferable price.