The Windshield division of Fast Car Co. makes windshields for use in Fast Car’s Assembly division. The Windshield division incurs variable costs of $200 per windshield and has capacity to make 500,000 windshields per year. The market price is $450 per windshield. The Windshield division incurs total fixed costs of $3,000,000 per year. If the Windshield division is operating at full capacity, what transfer price should be used on transfers between the Windshield and Assembly divisions?
The Windshield division of Fast Car Co. makes windshields for use in Fast Car’s Assembly division. The Windshield division incurs variable costs of $200 per windshield and has capacity to make 500,000 windshields per year. The market price is $450 per windshield. The Windshield division incurs total fixed costs of $3,000,000 per year. If the Windshield division is operating at full capacity, what transfer price should be used on transfers between the Windshield and Assembly divisions?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Windshield division of Fast Car Co. makes windshields for use in Fast Car’s Assembly division. The
Windshield division incurs variable costs of $200 per windshield and has capacity to make 500,000 windshields
per year. The market price is $450 per windshield. The Windshield division incurs total fixed costs
of $3,000,000 per year. If the Windshield division is operating at full capacity, what transfer price should
be used on transfers between the Windshield and Assembly divisions?
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