The lowest transfer price per unit that Division A might accept is $28 . In a transfer
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The lowest transfer price per unit that Division A might accept is $28. In a transfer pricing situation, it is important to consider the opportunity cost of using idle capacity. In this case, Division A's variable cost per unit is $18 and the allocated fixed costs are $5 per unit, bringing the total cost to $23 per unit. The lowest transfer price should not be lower than the total cost, so the lowest acceptable price is $23 + $5 = $28 per unit.
Related Book For
Managerial Accounting An Introduction to Concepts Methods and Uses
ISBN: 978-0324639766
10th Edition
Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil
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