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? Explain.
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