Your answer is incorrect. Try again. The Heating Division of Kobe International

Question

Your answer is incorrect. Try again. The Heating Division of Kobe International produces a heating element that it sells to its customers for $41 per unit. Its variable cost per unit is $26, and its fixed cost per unit is $11. Top management of Kobe International would like the Heating Division to transfer 14,800 heating units to another division within the company at a price of $27. 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 $25 per unit (rather than $26). What is the minimum transfer price that the Heating Division should accept? Minimum transfer price

Explanation / Answer

Minimum transfer price that Heating division should accept = 41-(26-25) = $40

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