Scottsdale Manufacturing is organized into two divisions: Fabrication and Assembly. Components transferred between the two divisions are recorded at a predetermined transfer price. Standard variable manufacturing cost per unit in the Fabrication Division is $$350.$ At the present time, this division is working to capacity. Fabrication estimates that the units it produces could be sold on the external market for $$580.$ The product under consideration is viewed as a commodity$-$type product, with no differentiating features or characteristics.

Required:

$2.$ Based on the general transfer pricing rule presented in the chapter, what is the minimum transfer price between units when the Fabrication Division is working to capacity?

$3.$ What if the Fabrication Division had excess capacity? How would this change the minimum transfer price as determined by the application of the general transfer pricing rule?