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Find what the economic rule would set transfer price as

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Reference no: EM132721195

Problem 1: The Rubber Division of Morgan Company manufactures rubber moldings and sells them externally for $50. At the current level of production, its variable cost is $20 per unit, and its fixed cost per unit is $7. Morgan's president wants the Rubber Division to transfer 5,000 units to another company division. Assuming the Rubber Division has available capacity for 5,000 additional units, the economic rule would set transfer price as:

Option 1: $20.
Option 2: $7.
Option 3: $27.
Option 4: $50.

Reference no: EM132721195

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