Answer and Explanation:
Given that
Units capacity = 52,500
Selling price to outside customers = $41
Variable cost per unit = $12
Fixed cost per unit = $24
Current purchased = 7,350 relay per year
Supplier cost per relay = $38
Avoidable variable expense = $4
Based on this, the minimum transfer price should be existed. Selling division would accept less than the maximum transfer price the buying division will approve. If the transfers were to occur both divisions would be better financially off.
As the minimum accpeted price is
= Selling price per unit - avoidable variable cost
= $41 - $4
= $37 per unit
And the supplier cost is $38 per unit
So it is less than the maximum transfer price i.e $38 per unit