Question

The fastener division of Southern Fasteners manufactures zippers and then sells them to customers for $7.53 per unit. Its variable cost is $2.66 per unit, and its fixed cost per unit is $1.43. Management would like the fastener division to transfer 11,900 of these zippers to another division within the company at a price of $2.66. The fastener division could avoid $0.34 per zipper of variable packaging costs by selling internally. Determine the minimum transfer price.

(a) Assuming the fastener division is not operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.)

-> What is the minimum transfer price?

(b) Assuming the fastener division is operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.)

-> What is the minimum transfer price?

Answer 1

1 Case: A Assuming Fasterner division is not operating at full capacity 3 Particulars Amount 4 Variable cost 2.66 5 LESS: avoidable packaging cost 0.34 6 Minimum Transfer price 2.32 | 7 Case:B Assuming if the fasterner division is operating at full capacity 9 Particulars Amount 10 Selling price to customers 7.53 11 LESS: avoidable packaging cost 0.34 12 Minimum Transfer price 7.191