Determining Transfer Price The Fabrication Division of Hawking Company manufactures an antenna component used by the Electronics Division. This antenna is also sold to external customers for $35 per...

The Fabrication Division of Hawking Company manufactures an antenna component used by the Electronics Division. This antenna is also sold to external customers for $35 per unit. Variable costs for the antenna are $17 per unit and fixed cost is $7 per unit. Hawking executives would like for the Fabrication Division to transfer 8,000 units to the Electronics Division at a price of $25 per unit.

Required:

1. Assume the Fabrication Department is operating at full capacity. Explain whether it should accept the transfer price proposed by management.

2. Identify the minimum transfer price that the Fabrication Division will accept and explain why.