Question: Mickey Inc has two divisions: Assembly and Fabrication. Standard variable manufacturing cost per unit in Fabricating is $500. The estimated external sales price for the

Mickey Inc has two divisions: Assembly and Fabrication. Standard variable manufacturing cost per unit in Fabricating is $500. The estimated external sales price for the units made by Fabrication is $650. The product is a commodity product.

a. What is the appropriate transfer price under the general rule of transfer pricing?

b. How does your answer change is Fabrication has excess capacity?

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