The Heating Division of Kobe International produces a heating element that it se

Question

The Heating Division of Kobe International produces a heating element that it sells to its customers for $41 per unit. Its variable cost per unit is $26, and its fixed cost per unit is $11. Top management of Kobe International would like the Heating Division to transfer 14,800 heating units to another division within the company at a price of $27. The Heating Division is operating at full capacity. Assume that the units being requested are special high-performance units and that the division's variable cost would be $25 per unit (rather than $26). What is the minimum transfer price that the Heating Division should accept?

Explanation / Answer

Answer

minimum transfer price = variable cost per unit + opportunity cost per unit

= 26 + ( 41 - 26 )

= 26 + 15

= 41

the minimum transfer price per unit = 41

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.