The Heating Division of KLM International produces a heating element that it sel

Question

The Heating Division of KLM International produces a heating element that it sells to its customers for $41 per unit. Its variable cost per unit is $15, and its fixed cost per unit is $10. Top management of KLM International would like the Heating Division to transfer 15,400 heating units to another division within the company at a price of $26. The Heating Division is operating at full capacity. Assume that the units being requested are special high-performance units, and that the division's variable cost would be $27 per unit. What is the minimum transfer price that the Heating Division should accept?

Minimum transfer price $______

Explanation / Answer

solution :

Per Unit VARIABLE COST 15 FIXED COST 10 TOTAL COST IF SOLD TO OUTSIDE CUSTOMER 25 ADDITIONAL VARIABLE COST (27-15) 12 MINIMUM TRANSFER PRICE 37

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.