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The Heating Division of Kobe International produces a heating element that it sells to its customers for $48 per unit. Its variable cost per unit is $22, and its fixed cost per unit is $12. Top management
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29 votes
The Heating Division of Kobe International produces a heating element that it sells to its customers for $48 per unit. Its variable cost per unit is $22, and its fixed cost per unit is $12. Top management of Kobe International would like the Heating Division to transfer 15,300 heating units to another division within the company at a price of $28. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept

User Fekioh
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1 Answer

17 votes
17 votes

Answer:

$48

Step-by-step explanation:

Calculation to determine the minimum transfer price that the Heating Division should accept

Using this formula

Min. transfer price=[VC/unit + (Lost USP - VC/unit)

Let plug in the formula

Min. transfer price=$22 + ($48 - $22)

Min. transfer price=$22+$26

Min. transfer price= $48

Therefore the minimum transfer price that the Heating Division should accept is $48

User Nitsua
by
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