Question: Porcus Corporation manufactures and sells bicycles The Wheel Frame
Porcus Corporation manufactures and sells bicycles. The Wheel & Frame Division creates parts that are both sold externally and transferred internally to the Assembly Division for assembly. Wheel #606 sells externally for $35 and the variable cost to make it is $27. What would you recommend as the transfer price between Wheels & Frames and Assembly if there is a competitive external market for #606? Would your answer change if there were no external market for #606? Why? What would the transfer price be if upper management required cost plus 20 percent as the transfer price?
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