Question
1) The Heating Division of Kobe International produces a heating element that it sells to its customers for $47 per unit. Its variable cost per
1) The Heating Division of Kobe International produces a heating element that it sells to its customers for $47 per unit. Its variable cost per unit is $20, and its fixed cost per unit is $5. Top management of Kobe International would like the Heating Division to transfer 14,700 heating units to another division within the company at a price of $26. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept?
| Minimum transfer price | $ | _____ |
2)
The Heating Division of Kobe International produces a heating element that it sells to its customers for $38 per unit. Its variable cost per unit is $20, and its fixed cost per unit is $5. Top management of Kobe International would like the Heating Division to transfer 14,500 heating units to another division within the company at a price of $25. Assume that the Heating Division has sufficient excess capacity to provide the 14,500 heating units to the other division. What is the minimum transfer price that the Heating Division should accept?
| Minimum transfer price | $ | _____ |
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Montgomery Auditing Continuing Professional Education
Authors: Patrick J. McDonnell, Barry N. Winograd, James S. Gerson, Henry R. Jaenicke, Vincent M. O'Reilly
12th Edition
0471346055, 978-0471346050
