Milwaukee Metallurgy Corporation (MMC)
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Milwaukee Metallurgy Corporation (MMC) has two divisions. The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price. /The Fabrication Division's standard variable production cost per unit is $450. The division has no excess capacity, and it could sell all of its components to outside buyers at $570 per unit in a perfectly competitive marker.
1. Determine a transfer price for MMC using the general rule.
2. How would the transfer price change if the Fabrication Division had excess capacity?
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Solution Summary
192 words with references to determine a transfer price and explain how excess capacity in fabrication of the product would change that.
Solution Preview
The transfer pricing is not only an accounting tool, rather it is a behavioral tool that motivate managers to make the right decisions, In particular the transfer price should be designed so that it accomplishes the following subjects:
1. It should provide each segment with the relevant ...
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