Question

If the axle division is now operating at full capacity and can sell all its units to outside customers at the present selling price, what is the minimum selling price that axle should accept from the internal division

Answer 1

The minimum selling price that Axel division should accept should be determined by adding the incremental costs and the total variable costs to get the total cost incurred during production. Then, divide the figure acquired by the number of products Axel intends to manufacture to get the minimum selling price.

Axel minimum selling price = (Total incremental costs + Total variable costs)/ The number of products Axel intends to manufacture.