10-12

The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $43 per unit. Variable costs for the casing are $30 per unit and fixed cost is $6 per unit. Cotwold executives would like for the Molding Division to transfer 26,000 units to the Assembly Division at a price of $37 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request. Required: 1. Should the Molding Division accept the $37 transfer price proposed by management? Yes O NO 2. Calculate the effect on the Molding Division's net income if it accepts the $37 transfer price. Net Income