The fastener division of Northern Textile Industries manufactures zippers and th

Question

The fastener division of Northern Textile Industries manufactures zippers and then sells them to customers for $7.81 per unit. Its variable cost is $3.09 per unit, and its fixed cost per unit is $1.90. Management would like the fastener division to transfer 12,690 of these zippers to another division within the company at a price of $3.09. The fastener division could avoid $0.24 per zipper of variable packaging costs by selling internally.

Determine the minimum transfer price (Round answers to 2 decimal places, e.g. 10.50.)
(a) assuming the fastener division is not operating at full capacity $

(b) assuming the fastener division is operating at full capacity $

Explanation / Answer

a) minimum transfer price assuming the fastener division is not operating at full capacity = variable price of the zipper = $3.30-$0.24 =$3.06 b) assuming the fastener division is operating at full capacity = $7.44- $0.24 = $7.20

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