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How solve the minimum transfer price

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Reference no: EM132590299

New England Corporation (NEC) has two divisions, Providence and Buffalo, and evaluates management on the basis of return on investment. Providence currently makes a part that it sells to both Buffalo and outsiders.

Selected data follow:

selling price to buffalo = 25

variable cost = 18

fixed cost = 80,000

Providence is seeking an increase in its selling price to $28 per unit because of rising costs. Buffalo can obtain comparable units from an outside supplier for $26; however, if Buffalo uses the supplier, Providence will have idle capacity because of an inability to increase sales to outsiders.

Question 1: Calculate the minimum Transfer Price (use the general transfer pricing rule)

Reference no: EM132590299

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