Question
The Bathtub Division of Marigold Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub Division would like to make a special
The Bathtub Division of Marigold Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub Division would like to make a special "ivory" tub with gold-plated fixtures for the company's 50-year anniversary. It would make only 4,700 of these units. It would like the Faucet Division to make the fixtures and provide them to the Bathtub Division at a transfer price of $149. If sold externally, the estimated unit variable cost would be $133. However, by selling internally, the Faucet Division would save $7 per unit on variable selling expenses. The Faucet Division is currently operating at full capacity. Its standard unit sells for $47 per unit and has variable costs of $30. Compute the minimum transfer price that the Faucet Division should be willing to accept.
Minimum transfer price | $enter the minimum transfer price in dollars |
Should they accept this offer?
They select an option should acceptshould not accept this offer.
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