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lilas company oflydias company produces a cooling element that it sells to its customers for $82 per unit. Its variable cost per unit is $30, and its fixed cost per unit is $25. Top management of lyds companywould like the lilas company to transfer 10,000 cooling units to another division within the company at a price of $60. lilas company currently has an excess capacity of 10,000 units. What is the minimum transfer price that the Cooling Division would accept? (Show the price and calculations 2.If the Cooling Division was operating at full capacity, what would be their minimum transfer price the Division should accept? (Show the price and calculations

Respuesta :

If Lilas Company has excess capacity of 10,000 units, the minimum transfer price that the Cooling Division would accept is the variable cost per unit plus the opportunity cost per unit.Variable cost per unit = $30 Opportunity cost per unit = Fixed cost per unit = $25Minimum transfer price = Variable cost per unit + Opportunity cost per unit Minimum transfer price = $30 + $25 = $55 per unitIf the Cooling Division was operating at full capacity, the minimum transfer price the division should accept would be the variable cost per unit plus the opportunity cost per unit, as well as the additional cost to cover the loss of contribution margin from selling externally.Variable cost per unit = $30 Opportunity cost per unit = Fixed cost per unit = $25 Contribution margin per unit (selling externally) = Selling price per unit - Variable cost per unit = $82 - $30 = $52Minimum transfer price = Variable cost per unit + Opportunity cost per unit + Loss of contribution margin per unit Minimum transfer price = $30 + $25 + $52 = $107 per unit

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