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ss7ja [257]
3 years ago
14

Palli Company has a division that manufactures a component that sells for $63 and has variable costs of $12 and fixed costs of $

21. Another division wants to purchase the component. What is the minimum transfer price if the division is operating at​ capacity?
Business
1 answer:
Ahat [919]3 years ago
7 0

Answer:

minimum transfer price $12

Explanation:

The minimum transfer price should be the cost to produce the additional units to transfer. AKA <em>marginal cost</em>

In this case, the division faces $12 of variable cost to produce a single unit.

As long as the units to transfer are within the relevant range of the current capacity the fixed cost are irrelevant for the transfer price as these are sunk cost (already incurred)

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It mainly ensure that the fairness in the competition in the market. Antitrust concerns are mainly focus on the institutional acquisitions and the alliances.

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