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The Heating Division of Kobe International produces a heating element that it sells to its customers for $45 per unit. Its variable cost per unit is $25, and its fixed cost per unit is $10. Top management of Kobe International would like the Heating Division to transfer 15,000 heating units to another division within the company at a price of $29. Assume that the Heating Division has sufficient excess capacity to provide the 15,000 heating units to the other division. What is the minimum transfer price that the Heating Division should accept?

Respuesta :

TomShelby

Answer:

transfer cost $25

Explanation:

The minimum transfer price is equal to the marginal price.

The marginal price, in this case, will be the variable cost, because there is no additional fixed cost related to the transfer:

This should be analyzed like a special order request, only the variable cos matter unless we incur in additional fixed cost.

Marginal Cost = Variable cost: 25

anthougo

The minimum transfer price that the Heating Division should accept is $25.

What is the minimum transfer price?

The minimum transfer price usually equals the incremental (variable) cost to create one unit of the product.

The incremental (variable) cost includes direct labor, direct material, and direct overhead costs but excludes the fixed expenses.

Data and Calculations:

Selling price per unit = $45

Variable cost per unit = $25

Fixed cost per unit = $10

Units of heating to be transferred = 15,000

Transfer rate = $29

Thus, the minimum transfer price that the Heating Division should accept is $25.

Learn more about the minimum transfer price at https://brainly.com/question/10538986

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