Question

The Wood Division of Fir Products, Inc. manufactures rubber moldings and sells them externally for $55. Its variable cost is $25 per unit, and its fixed cost per unit is $7. Fir’s president wants the Wood Division to transfer 5,000 units to another company division at a price of $32. Assuming the Wood Division has available capacity of 5,000 units, the minimum transfer price it should accept is

Answer 1

$25

Step-by-step explanation:

Since there is an available capacity of 5,000 units so in this case, the minimum transfer price which should be accepted is equal to the variable cost per unit i.e $25 and the same is to be considered as it is enough to cover its variable production cost

Therefore, all the other information which is given in the question is not relevant. Hence, ignored it