Minimum Transfer Price
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The heating division of ITA International produces a heating element that it sells to its customers for $42 per unit. Its variable cost per unit is $19, and its fixed cost per unit is $10. Top management of ITA International would like the heating division to transfer 15,000 heating units to another division within the company at a price of $29. The heating division is operating at full capacity. Assume that the units being requested are special high-performance units, and that the division's variable cost would be $24 per unit.
What is the minimum transfer price that the heating division should accept?
I don't understand what to do with the variable cost 24$/unit.
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The margin on each unit is $42-$19=$23 per unit.
So this means that if the heating division stops producing these ...
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