The Fabricating division makes a component part that the Assembly division needs for a new product. The Fabricating divisions variable cost of manufacturing the component is $28 per unit. The component is also available on the open market at a price of $50 per unit. The Assembly division needs 936 units per year, and the Fabricating division has excess capacity of 1,200 units. (a) Calculate the cost-based transfer price that the Fabricating division should charge the Assembly division.

Cost based transfer price

(b) Calculate the market-based transfer price that the Fabricating division should charge the Assembly division.

Market based transfer price