Vaibhav Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluatedas profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sellsmany components to third parties in addition to Marketing. Selected data from the two operations follow.Capacity (units)Sales priceaVariable costsbFixed costsManufacturing Marketing1,130,000513,0005,2001,940$7,330,000$$a.Transfer priceb. Transfer price2,050 $690 $$11,300,000a For Manufacturing, this is the price to third parties.b For Marketing, this does not include the transfer price paid to Manufacturing.Required:a. Current production levels in Manufacturing are 613,000 units. Marketing requests an additional 113,000 unitsto produce a special order. What transfer price would you recommend?b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend?per unitper unit

Lets understand the basics.When transfer is made between the departments of the company then it is…

Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow. Capacity (units) Sales pricea Variable costsb Fixed costs Manufacturing 1,130,000 2,050 690 $ $ $11,300,000 Marketing 513,000 5,200 1,940 $7,330,000 $ $