The Appraisal Department of MacDonald Bank performs appraisals of business properties for loans being considered by the
Question:
Recently, MacDonald Bank has opened its own Home-Loan Department and wants the Appraisal Department to perform 1,200 appraisals on all MacDonald Bank-financed home loans. Bank management feels that the cost of these appraisals to the Home-Loan Department should be $150. The variable cost per appraisal to the Home-Loan Department would be $6 less than those performed for outside customers due to savings in administrative costs.
Instructions
(a) Determine the minimum transfer price, assuming the Appraisal Department has excess capacity.
(b) Determine the minimum transfer price, assuming the Appraisal Department has no excess capacity.
(c) Assuming the Appraisal Department has no excess capacity, should management force the department to charge the Home-Loan Department only $150? Discuss.
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Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-0470477144
5th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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