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What would be the minimum transfer price per unit

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Question - Division A produces a product that it sells to the outside market. It has compiled the following:

Variable manufacturing cost per unit $11

Variable selling costs per unit $3

Total fixed manufacturing costs $166000

Total fixed selling costs $30000

Per unit selling price to outside buyers $50

Capacity in units per year 30000

Division B of the same company is currently buying an identical product from an outside provider for $48 per unit. It wishes to purchase 5000 units per year from Division A. Division A is currently selling 26000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?

Reference no: EM132563345

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