Question

he Heating Division of Kobe International produces a heating element that it sells to its customers for $45 per unit. Its variable cost per unit is $22, and its fixed cost per unit is $8. Top management of Kobe International would like the Heating Division to transfer 15,100 heating units to another division within the company at a price of $27. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Divis

Answer 1

Answer:

$45 per unit.

Explanation:

The minimum transfer price is the price that is acceptable to the transferring division and out out of a range of acceptable prices, it is that price the would be the best for the company.

Min Transfer Price = Variable Costs - Internal Savings + Opportunity cost

                              = $22 +  15,100/15,100 × ($45-$22)

                              = $45