Pointe Claire Inc. operates as a decentralized multidivisional electronics company. It has two divisions. Division A transfers partially completed components to division B at a predetermined transfer price. The division A's standard variable production cost per unit is $400. Division A is operating at full capacity and it could sell all of its components to outside buyers at $520 per unit.
Instructions
(a) Determine an appropriate transfer price for division A.
(b) How would the transfer price change if division A had excess capacity?