Pert Corporation manufactures state-of-the-art DVD players. It is a division of Vany TV, which manufactures televisions. Pert sells the DVD players to Vany, as well as to retail stores. The following information is available for Pert's DVD player: variable cost per unit $60; fixed costs per unit $45; and a selling price of $150 to outside customers. Vany currently purchases DVD players from an outside supplier for $140 each. Top management of Vany would like Pert to provide 50,000 DVD players per year at a transfer price of $60 each.
Instructions
Compute the minimum transfer price that Pert should accept under each of the following assumptions:
1. Pert is operating at full capacity.
2. Pert has sufficient excess capacity to provide the 50,000 players to Vany.

Question

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The Answer of Pert Corporation manufactures state-of-the-art DVD players. It is a division of Vany TV, which manufactures televisions. Pert sells the DVD players to Vany, as well as to retail stores. The following information is available for Pert's DVD player: variable cost per unit $60; fixed costs per unit $45; and a selling price of $150 to outside customers. Vany currently purchases DVD players from an outside supplier for $140 each. Top management of Vany would like Pert to provide 50,000 DVD players per year at a transfer price of $60 each.
Instructions
Compute the minimum transfer price that Pert should accept under each of the following assumptions:
1. Pert is operating at full capacity.
2. Pert has sufficient excess capacity to provide the 50,000 players to Vany.

Pert Corporation Manufactures State-Of-The-Art DVD Players