Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The Appraisal Department of Ivanhoe Mortgage Bank performs appraisals of business properties for loans being considered by the bank and appraisals for home buyers that
The Appraisal Department of Ivanhoe Mortgage Bank performs appraisals of business properties for loans being considered by the bank and appraisals for home buyers that are financing their purchase through some other financial institution. The department charges $365 per home appraisal and its variable costs are $320 per appraisal. Recently, Ivanhoe Mortgage Bank has opened its own Home-Loan Department and wants the Appraisal Department to perform 1,340 appraisals on all Ivanhoe Mortgage Bank-financed home loans. Bank management feels that the cost of these appraisals to the HomeLoan Department should be $350. The variable cost per appraisal to the Home-Loan Department would be $10 less than those performed for outside customers due to savings in administrative costs. Determine the minimum transfer price assuming that the Appraisal Department has excess capacity. Minimum transfer price Determine the minimum transfer price assuming that the Appraisal Department has no excess capacity. Minimum transfer price $ Assuming that the Appraisal Department has no excess capacity, should management force the department to charge the HomeLoan Department only $350
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started