Assume that Selling Division and Buying Division are both owned by Overall Corporation. Selling Division sells a product that is used by Buying Division and outside customers. Selling Division has 28,000 units of excess capacity. Selling Division currently sells the product for $25 per unit and Buying Division currently buys 28,000 units of the product from an outside source for $25 per unit. Variable costs of the product are $5, of which $1.25 is the cost of selling the product to an outside customer.
Using Selling price less avoidable costs as the minimum price, fill in the following formula for the desired transfer price: $________ < transfer price < $________ .
Using Variable costs as the minimum price, fill in the following formula for the desired transfer price: $_______ < transfer price < $___________ .