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What is the transfer price range

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Question - Fistman Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Machine Products Division has asked the Parts Division to provide it with 10,000 special parts each year. The special parts would require $15.00 per unit in variable production costs.

The Machine Products Division has a bid from an outside supplier for the special parts at $29.00 per unit. In order to have time and space to produce the special part, the Parts Division would have to cut back production of another part-the H56 that it presently is producing. The H56 sells for $32.00 per unit, and requires $19.00 per unit in variable production costs. Packaging and shipping costs of the H56 are $3.00 per unit. Packaging and shipping costs for the new special part would be only $1.00 per unit. The Parts Division is now producing and selling 40,000 units of the H56 each year. Production and sales of the H56 would drop by 20% if the new special part is produced for the Machine Products Division.

Requirements - What is the transfer price range?

Reference no: EM131809265

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