The Post Division produces basic posts which can be sold to outside customers or sold to the
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Question:
The Post Division produces basic posts which can be sold to outside customers or sold to the Lamp Division of the same company. The following data for the Post Division are available:
Capacity in units 500,000 posts
Selling price per post to outside customers $30
Variable costs per post $21
Fixed costs, total $20,000
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 profits of the Post Division?
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