A. The transfer price range is between $112 and $136.
B. If a transfer is made at <u>$130</u>, the firm profits will reduce by $1,500,000.
<h3>What is an acceptable transfer price?</h3>
The acceptable transfer price ranges between the variable costs of the producing department or the variable costs plus a calculated opportunity cost.
The opportunity cost represents the lost cost with the transfer when the division could have gone ahead with an external sale instead.
<h3>Data and Calculations:</h3>
Offer from the Assembly Division = 90,000 batteries
Offer transfer price = $104 per unit
Current production per year = 250,000 units
Current external selling price = $136 per unit
External cost per unit = $130
<h3>Production Costs of the Electrical Division:</h3>
Direct materials, $40
Direct labor, 20
Variable factory overhead, 12
Total variable costs per unit = $72
Opportunity cost per unit = $64 ($136 - $72)
Fixed factory overhead, 40
Total, $ 112
A. The transfer price range is between $112 and $136.
B. If a transfer is made at $130, the firm profits will be less by $1,500,000 (250,000 x $130 - $136).
Learn more about acceptable transfer prices at brainly.com/question/23411982 and brainly.com/question/24279136
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