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quester [9]
2 years ago
8

WAX-D Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of

the company wants to purchase the component. Fixed cost per unit of component is $25. What is the minimum transfer price if the division is operating below its capacity
Business
1 answer:
inn [45]2 years ago
8 0

Answer: $70

Explanation:

If the division producing the component is operating below its capacity then it means that supplying the division that needs the component will not lead to opportunity costs in terms of foregone orders from outside the company for the component.

In such a case, the transfer price from one department to another should be the cost of producing the good which in this case is:

= Variable cost per unit + Fixed cost per unit

= 45 + 25

= $70

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Explanation:

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Read 2 more answers
Crossroad chooses to report a financial asset at its fair value. The asset trades in two different markets; however, neither mar
Alex

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Explanation:

The options given are:

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