Current Attempt in Progress The Appraisal Department of Riverbed Bank performs appraisals of business properties for loans being considered by the bank an appraisals for home buyers that are financing their purchase through some other financial institution. The department charges $1 per home appraisal, and its variable costs are $143 per appraisal. Recently, Riverbed Bank has opened its own Home-Loan Department and wants the Appraisal Department to perform 1,272 appraisals on all Riverbed Bank-financed home loans. Bank management feels that the cost of these appraisals to the Home-Loan Department should be $159. The variable cost per appraisal to the Home-Loan Department would be $7 less than those performe outside customers due to savings in administrative costs. (a) Determine the minimum transfer price, assuming the Appraisal Department has excess capacity. Minimum transfer price $ (b) Determine the minimum transfer price, assuming the Appraisal Department has no excess capacity. Minimum transfer price $ (c) Assuming the Appraisal Department has no excess capacity, should management force the department to charge the Home-Loan Department only $159?
Current Attempt in Progress The Appraisal Department of Riverbed Bank performs appraisals of business properties for loans being considered by the bank an appraisals for home buyers that are financing their purchase through some other financial institution. The department charges $1 per home appraisal, and its variable costs are $143 per appraisal. Recently, Riverbed Bank has opened its own Home-Loan Department and wants the Appraisal Department to perform 1,272 appraisals on all Riverbed Bank-financed home loans. Bank management feels that the cost of these appraisals to the Home-Loan Department should be $159. The variable cost per appraisal to the Home-Loan Department would be $7 less than those performe outside customers due to savings in administrative costs. (a) Determine the minimum transfer price, assuming the Appraisal Department has excess capacity. Minimum transfer price $ (b) Determine the minimum transfer price, assuming the Appraisal Department has no excess capacity. Minimum transfer price $ (c) Assuming the Appraisal Department has no excess capacity, should management force the department to charge the Home-Loan Department only $159?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Current Attempt in Progress
The Appraisal Department of Riverbed Bank performs appraisals of business properties for loans being considered by the bank an
appraisals for home buyers that are financing their purchase through some other financial institution. The department charges $1
per home appraisal, and its variable costs are $143 per appraisal.
Recently, Riverbed Bank has opened its own Home-Loan Department and wants the Appraisal Department to perform 1,272
appraisals on all Riverbed Bank-financed home loans. Bank management feels that the cost of these appraisals to the Home-Loan
Department should be $159. The variable cost per appraisal to the Home-Loan Department would be $7 less than those performe
outside customers due to savings in administrative costs.
(a)
Determine the minimum transfer price, assuming the Appraisal Department has excess capacity.
Minimum transfer price
$
(b)
Determine the minimum transfer price, assuming the Appraisal Department has no excess capacity.
Minimum transfer price
$
(c)
Assuming the Appraisal Department has no excess capacity, should management force the department to charge the Home-Loan
Department only $159?
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