Question

​raven, inc. has a division that manufactures a component that sells for $195 and has a variable cost of $40. another division of the company wants to purchase the component. fixed cost per unit of the component is $25. what is the minimum transfer price if the division is operating below its​ capacity?

Answer 1

The minimum transfer price should be $65 because that's what it costs to produce the product.
$40 variable costs and $25 fixed costs = $65 to produce. Since they are going to transfer the production to another part of the company, the company is still incurring the same costs and should be able to pay for them.