Use the data from BE8-7, but assume that the units being requested are special high-performance units and
Question:
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?
Step by Step Answer:
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso