Question
Two Wheel Green Machines manufactures and sells bicycles. The tire manufacturing division sells its products to customers for $15 each. The variable cost per tire
Two Wheel Green Machines manufactures and sells bicycles. The tire manufacturing division sells its products to customers for $15 each. The variable cost per tire is $7.50 and fixed costs per tire are $3.00. The bicycle assembly division has been buying tires from an outside source for $14 each. Upper management wants the tire division to transfer 50,000 tires to the assembly division with the company at a price of $12 per tire. The tire division has sufficient excess capacity to provide the 50,000 tires to the assembly division. Calculate the minimum transfer price that the tire division should accept. What would be the minimum transfer price if the tire division was operating at full capacity?
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