Question

Brief Exercise 21-03 x Your answer is incorrect. Try again. The Heating Division of Kobe International produces a heating element that it sells to its customers for $46 per unit. Its variable cost per unit is $22, and its fixed cost per unit is $10. 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. Assume that the Heating Division has sufficient excess capacity to provide the 14,800 heating units to the other division. What is the minimum transfer price that the Heating Division should accept? Minimum transfer price Click if you would like to Show Work for this question: Open Show Work

Answer 1

Answer

Explanation :

Minimum transfer price (at full capacity) = (Variable cost per unit+ Opportunity costs

= $22 per unit + ($46 per unit - $22 per unit)

= $21 per unit+$24 per unit

= $46 per unit

Therefore, Minimum transfer price is $46 per unit