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The Post Division of the MT Woodhead Company produces basic posts that can be sold to outside customers or sold to the Lamp Division of
The Post Division of the MT Woodhead Company produces basic posts that can be sold to outside customers or sold to the Lamp Division of the MT. Woodhead Company. Last year, the Lamp Division bought all of its 25,000 posts from the Post Division at $200 each. The following data are available for last year's activities of the Post Division Capacity in Units 300,000 posts Selling Price per Post to Outside $225 Customers Variable costs per Post $0.90 Fixed Costs, Total $120,000 The total fixed costs would be the same for all the alternatives considered below (Appendix 11A) Suppose there is ample capacity so that transfers of the posts to the Lamp Division do not cut into sales to outside customers. What is the lowest transfer price that would not reduce the operating income of the Post Division
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