Calculate the minimum transfer price

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Elmira Manufacturing Inc. has two divisions, Division A and Division B. Division A produces car stereos that it sells to retail stores for a price of $82per unit. Its full capacity is at230,000units but it currently sells 200,000 units. It incurs the following costs in its production:

Direct materials $36
Direct labour $23
Variable overhead $10
Fixed overhead $4

Division B is purchasing15,000units of the same car stereos from an outside supplier for $74per unit.

1. Calculate the minimum transfer price Division A is willing to accept.

2. Determine the effect on the net income of Division A.

3.Determine the effect on the net income of Division B

Reference no: EM131784425

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