Markey Corporation consists of two divisions, North and South. The North makes Glop, a product that can be used in the production of the product that the South division makes and sells. Both divisions are considered profit centers. The following data are available concerning Glop and the two divisions:

NorthSouthAverage units produced150,000Average units sold150,000Variable manufacturing cost per unit$2Variable finishing cost per unit$5Fixed divisional costs$75,000$125,000

The North Division can sell all of its output outside the company for $4 per unit. The South Division can buy the Glop from other firms for $4. The South Division sells its product for $12.What is the optimal transfer price in this case?

Answer rating: 100% (QA)

The optimal transfer price is the price at which the North Division should sell Glop to the South Di... View the full answer