The University’s Bookstore manufactures and sells t-shirts e…

The University’s Bookstore manufactures and sells t-shirts externally for $24.50 per shirt. Its unit variable costs are $16 and unit fixed costs are $4. The Park Avenue location wants to purchase 4,000 t-shirts from the Bookstore for $18.50 per t-shirt. The Bookstore can save $1.50 per t-shirt in variable costs if products are transferred internally. Assuming the Bookstore is already operating at full capacity, should the bookstore accept the proposed transfer price of $18.50? Why or why not?