Illinois Metallurgy Corporation has two divisions. The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price. The Fabrication Divisions standard variable production cost per unit is $525. The division has no excess capacity, and it could sell all of its components to outside buyers at $720 per unit in a perfectly competitive market.

Required:

Determine a transfer price using the general rule.

What would be the transfer price if the Fabrication Division had excess capacity?