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 $47 per unit. Its variable cost per unit is $21, and its fixed cost per unit is $7. Top management of Kobe International would like the Heating Division to transfer 15,400 heating units to another division within the company at a price of $28. 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 $21). What is the minimum transfer price that the Heating Division should accept? ($21 not correct)

Explanation / Answer

$25

the units being requested are special high-performance units and that the division's variable cost would be $25 per unit

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