Pregunta
Unit fixed cost
Unit variable cost 12
Unit selling price 32
(a)
Your answer is correct.
Assuming that the Small Motor Division has excess capacity, compute the minimum acceptable price for the transfer of small motor LN233 to the Household Division. (Round answer to 2 decimal places, e.s. 10.50 .)
Minimum transfer price
eTextbook and Media
Attempts: 3 of 10 used
(b)
Your answer is incorrect.
Assuming that the Small Motor Division does not have excess capacity, compute the minimum acceptable price for the transfer of the small motor to the Household Division. (Round answer to 2 decimal places, e.s. 10.50.)
Minimum transfer price
$
Unit variable cost 12
Unit selling price 32
(a)
eTextbook and Media
(b)
Minimum transfer price
$
Ask by Little Wood. in the United States
Mar 27,2025
Solución de inteligencia artificial de Upstudy
Respuesta verificada por el tutor
Responder
(a)
Minimum transfer price: $12.00 per unit
Minimum transfer price: $12.00 per unit
(b)
Minimum transfer price: $32.00 per unit
Minimum transfer price: $32.00 per unit
Solución
(a)
Since the Small Motor Division has excess capacity, the division’s opportunity cost is zero. Thus, the minimum acceptable transfer price is equal to the unit variable cost.
Since the Small Motor Division has excess capacity, the division’s opportunity cost is zero. Thus, the minimum acceptable transfer price is equal to the unit variable cost.
(b)
When the Small Motor Division does not have excess capacity, transferring internally means that the division will forego sales at the external market price. In this case, the lost contribution per unit is the difference between the external selling price and the unit variable cost.
When the Small Motor Division does not have excess capacity, transferring internally means that the division will forego sales at the external market price. In this case, the lost contribution per unit is the difference between the external selling price and the unit variable cost.
Thus, the minimum acceptable transfer price must cover both the unit variable cost and the lost contribution:
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Simplifique esta solución Beyond the Answer
To determine the minimum acceptable price for the transfer of the small motor LN233, we’ll approach it from two perspectives based on your scenarios.
For part (a), with excess capacity, the minimum transfer price typically equals the unit variable cost, which is $12. So, the minimum acceptable price in this case is $12.00 per unit.
For part (b), without excess capacity, the minimum acceptable transfer price includes both the unit variable cost and a portion of the fixed costs allocated per unit. Assuming a certain level of production to spread the fixed costs, the total cost structure could dictate the minimum transfer price would equate to the selling price of $32, as the Small Motor Division would want to cover lost revenue from external sales. Therefore, the minimum acceptable price here could be $32.00 per unit.
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