Question: Use the data from BE8-7, but assume that the units being requested are special high-performance units and that the divisions variable cost would be $24

Use the data from BE8-7, but assume that the units being requested are special high-performance units and that the division’s variable cost would be $24 per unit (rather than $20). What is the minimum transfer price that the Heating Division should accept?

Data From BE8-7

The Heating Division of KLM International produces a heating element that it sells to its customers for $45 per unit. Its variable cost per unit is $20, and its fi xed cost per unit is $10. Top management of KLM International would like the Heating Division to transfer 15,000 heating units to another division within the company at a price of $29. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept?

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