ACME Incorporated has a division (selling division) that is considering selling 2,000 units to another division (buying division) of the same company. The selling division is currently making 49,000 units – capacity is 50,000 units – and selling all of them for $30 each. Product costs are as follows:

Variable cost per unit	$12.00
Fixed cost per unit based on capacity	$3.00

The buying division needs the product to be customized at a cost of $4 per unit. They currently buy the product from an external supplier for $27 each.

Required:

What is the minimum acceptable price the selling division will accept as a transfer price? 

What is the acceptable range, if any, for the transfer price between the two divisions? 

Answer rating: 100% (QA)

To determine the minimum acceptable transfer price for the selling division we need to consider the ... View the full answer