The Molding Division of White Corporation manufactures plastic molds and then se

Question

The Molding Division of White Corporation manufactures plastic molds and then sells them to customers for $40 per unit. Its variable cost is $15 per unit, and its fixed cost per unit is $5. Management would like the Molding Division to transfer 15,000 of these molds to another division within the company at a price of $23. The Molding Division has available capacity to produce the 15,000 units for the other division. What is the minimum transfer price the Molding Division should accept? Ans = 23, 20 ,15, 40

Explanation / Answer

The molding division should accept the minimum transfer price of $20 per unit i.e the division should cover atleast its variable cost and fixed cost to manufacture the molds.
Minimum transfer price=variable cost +fixed cost
15+5=$20

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