The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $40 per unit. Variable costs for the casing are $27 per unit and fixed cost is $6 per unit. Cotwold executives would like for the Molding Division to transfer 23,000 units to the Assembly Division at a price of $34 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request. Required: 1. Should the Molding Division accept the $34 transfer price proposed by management?

multiple choice

• Yes

• No

2. Calculate the effect on the Molding Divisions net income if it accepts the $34 transfer price.