Division A has variable manufacturing costs of $50 per unit and fixed costs of $10 per unit. Assuming that Division A is operating at capacity, what is the optimal transfer price of an internal transfer when the market price is $75?

 Division A has variable manufacturing costs of $50 per unit and fixed costs of $10 per unit. Assuming that Division A is operating at capacity, what is the optimal transfer price of an internal transfer when the market price is $75?

 Answer

$75

Explanation

When operating at capacity, the optimal transfer price is the market price of $75.

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