Exam 16: Responsibility Accounting, Performance Evaluation and Transfer Pricing

If a supplying division has excess capacity, the best transfer price is the product's variable cost.

The National Division of RedBubble Ltd is buying 10,000 widgets from an outside supplier at $30 per unit. RedBubble's Overseas Division, which is producing and selling at full capacity (12,000 units), has the following sales and cost structure: Sales price per unit \4 5.00 Variable costper unit 22.50 Fixed cost (at capacity) per unit 15.00 If the National Division buys its 10,000 widgets from the Overseas Division, the transfer price should be:

Technical details about complex manufacturing processes are examples of specific knowledge.