The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $27 per unit. Variable costs for the casing are $14 per unit and fixed cost is $3 per unit. Cotwold executives would like for the Molding Division to transfer 10,000 units to the Assembly Division at a price of $19 per unit. Assume the Molding Division is operating at full capacity. Required: 1. Should it accept the transfer price proposed by management

Cotwold Company

The Molding Division

The Molding Division should not accept the transfer price proposed by management.  It is not reasonable and fair according to the rules for transfer pricing.  However, the amount is above the marginal cost for the Molding Division.

Therefore, the division should exhaust opportunities for renegotiation of the transfer price.  However, ultimately, management's decision will prevail.

Explanation:

a) Data and Calculations:

Price of casing to external customers = $27 per unit

Variable costs for the casing = $14 per unit

Fixed cost for the casing = $3 per unit

Quantity to the Assembly Division = 10,000

Agreed transfer price = $19

answer; ///i believe the correct answer is (350); (c) is your answer

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.