Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 45

The windshield division of Fast Car Co. makes windshields for use in Fast Car's assembly division. The windshield division incurs variable costs of $200 per windshield and has capacity to make 500,000 windshieldsper year. The market price is $450 per windshield. The windshield division incurs total fixed costs of $3,000,000 per year. If the windshield division is operating at full capacity, what transfer price should be used on transfers between the windshield and assembly divisions Explain.