Milwaukee Metallurgy Corporation (MMC) has two divisions. The Fabrication Division transfers partially completed components to the Assembly

Question:

Milwaukee Metallurgy (MMC) has two divisions. The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price. The Fabrication Division’s standard variable production cost per unit is $450. The division has no excess capacity, and it could sell all of its components to outside buyers at $570 per unit in a perfectly competitive market.

Required:
1. Determine a transfer price for MMC using the general rule.
2. How would the transfer price change if the Fabrication Division had excess capacity?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...