Brief Exercise 22-8 Your answer is incorrect. Try again. The Heating Division of

Question

Brief Exercise 22-8 Your answer is incorrect. Try again. The Heating Division of KLM International produces a heating element that it sells to its customers for $47 per unit. Its variable cost per unit is $18, and its fixed cost per unit is $9. Top management of KLM International would like the Heating Division to transfer 15,000 heating units to another division within the company at a price of $30. Assume that the Heating Division has sufficient excess capacity to provide the 15,000 heating units to the other division. What is the minimum transfer price that the Heating Division should accept? the Heating Division hrisbie cost per unit is $18, Minimum transfer price 35

Explanation / Answer

The minimum transfer price that the division must charge is the variable cost per unit of one heating element = 18

Since the company has excess capacity and can transfer 15000 units, we will not consider the pportunity cost as the company is already selling to its full capacity in the outside market

Correct ANswer: 18

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