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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 $500. The division has no excess capacity, and it could sell all of its components to outside buyers at $670 per unit in a perfectly competitive market. Determine a transfer price using the general rule.

	Transfer price

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

	Transfer price