Khan Ltd. has two divisions, Europe and Asia. Europe produces a ball bearing that Asia uses in its production. Europe's variable cost is $2 per unit and the fixed cost per unit is $1.50. Ball bearings sell on the open market for $6 each. If Europe has excess capacity, what would be the minimum transfer price if Asia currently is purchasing 100,000 units on the open market?
Khan Ltd. has two divisions, Europe and Asia. Europe produces a ball bearing that Asia uses in its production. Europe's variable cost is $2 per unit and the fixed cost per unit is $1.50. Ball bearings sell on the open market for $6 each. If Europe has excess capacity, what would be the minimum transfer price if Asia currently is purchasing 100,000 units on the open market?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Khan Ltd. has two divisions, Europe and Asia. Europe produces a ball bearing that Asia uses in its production. Europe's variable cost is $2 per unit and the fixed cost per unit is $1.50. Ball bearings sell on the open market for $6 each. If Europe has excess capacity, what would be the minimum transfer price if Asia currently is purchasing 100,000 units on the open market?
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