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What should be the minimum acceptable transfer price

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Reference no: EM133034619

Question - Koppenhaver Products has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below:

Capacity in units 85.000

Selling price to outside customers $63

Variable cost per unit $38

Fixed cost per unit (based on capacity) $20

The Electronics Division is currently purchasing 15,000 of these relays per year from an overseas supplier at a cost of $57 per relay.

Assume that the Relay Division is selling 80,000 valves it can produce to outside customers. Also assume that none expenses can be avoided on transfers within the company.

What should be the minimum acceptable transfer price for the relays from the standpoint of the Relay Division?

a. $57 per unit

b. $54,7 per unit

c. $44,7 per unit

d. $53 per unit

Reference no: EM133034619

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