Patch Watch Company’s Seconds Store offers refurbished or factory seconds time-keeping products to the public at substantially reduced prices. The factory controller is developing transfer price alternatives to present to management to determine the best price to use when transferring products from the factory to the store, using the following data:

Unit price if sold to outside retailers ......$25

Variable product cost per unit ........ 10

Fixed product cost per unit .......... 5

Seconds store profit markup ......... 40%

1. What is the market-based transfer price alternative?

2. What is the minimum transfer price alternative?

3. Compute the cost-plus transfer price alternative assuming cost includes variable costs only.