Task: 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?