You are negotiating to make a 7-year loan of $37,500 to Breck Inc. To repay you, Breck will pay $2,500 at the end of Year 1, $5,
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Transfer price is an alternative term of opportunity cost.
$ 289.66 is the transfer price can be utilized for transport costs, loading and unloading costs, and administrative costs
solution
Transfer cost is the Total opportunity cost of moving an item from one place to another, including transport costs, loading and unloading costs, and administrative costs. Transfer price is an alternative term of opportunity cost.
Total variable cost = 740,000× $220 = 162,800,000
Total fixed cost = $3,950,000
Total selling cost = 740,000 × $515 = $381,100,000
Transfer cost = (selling cost - (variable cost + Fixed cost )
= ($381,100,000- ($162,800,000 + $3,950,000) = $214,350,000
Transfer price = $214,350,000 ÷ 740,000 units = $ 289.66