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The Can Division of Bonita Industries manufactures and sells tin cans externally for $1.20 per can....

The Can Division of Bonita Industries manufactures and sells tin cans externally for $1.20 per can. Its unit variable costs and unit fixed costs are $0.24 and $0.10, respectively. The Packaging Division wants to purchase 50,000 cans at $0.34 a can. Selling internally will save $0.03 a can.

Assuming the Can Division has sufficient capacity, what is the minimum transfer price it should accept?

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Answer #1
When the division has sufficient capacity, the minimum transfer price equals the variable cost per unit less any savings in internal transfer.
Unit variable costs 0.24
Less: Savings in internal transfer 0.03
Minimum transfer price 0.21
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