Starcic Products,Inc.,has a Connector Division that manufactures and sells a number of products,including a standard connector.Data concerning that connector appear below:
The company has a Transmission Division that needs 6,000 special heavy-duty connectors per year.The Connector Division's variable cost to manufacture and ship this special connector would be $62 per unit.Making these special connectors would require more manufacturing resources.Therefore,the Connector Division would have to reduce its production and sales of regular connectors to outside customers from 45,000 units per year to 38,400 units per year.
Required:
As far as the Connector Division is concerned,what is the lowest acceptable transfer price for the special connectors?
Definitions:
Direct Materials Used
Direct materials used are the raw materials directly incorporated into a product being manufactured, contributing to the cost of goods sold.
Factory Overhead
All indirect costs associated with manufacturing, including indirect labor, materials, and expenses that cannot be directly traced to a product.
Current Assets
Cash and other assets that are expected to be converted to cash or sold or used up, usually within one year or less, through the normal operations of the business.
Total Manufacturing Costs
The aggregate of expenses related to producing goods, including raw materials, labor, and overhead costs.
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