What is minimum transfer price?
How to Find the Minimum Transfer Price. The general economic transfer price rule is that the minimum must be greater than or equal to the marginal cost of the selling division. In economics and business management, a marginal cost is equal to the total new expense incurred from the creation of one additional unit.Click to…
How to Find the Minimum Transfer Price. The general economic transfer price rule is that the minimum must be greater than or equal to the marginal cost of the selling division. In economics and business management, a marginal cost is equal to the total new expense incurred from the creation of one additional unit.Click to see full answer. In respect to this, what is the minimum transfer price formula?one for the labor used on a job and another for the material. 29. Minimum Transfer Price Formula Definition- a. Minimum Transfer Price = Variable Cost + Opportunity Cost 30.One may also ask, what is minimum selling price? The minimum selling price is used to prevent items from being sold with little or no margin. The minimum sell price can be defined as either a dollar amount or a percentage over base cost. Items cannot be sold below the Minimum Sell Price. Unit Price will be set to the minimum: $99.99″. Keeping this in consideration, how do you find the minimum acceptable price? Minimum acceptable selling Price. Total Relevant Cost of 10 Machines. = Outlay Cost + Opportunity Cost (if any) Outlay Cost = Incremental material outlay cost to convert the 10 machines. $ 625.00. Total incremental Direct Labor Cost : $3,000. + Opportunity Costs. $100,000. SUMMARY. Ans. Minimum Selling Price: $109,250 / 10 = $10,925. How do you calculate opportunity cost in transfer pricing? Key Equation **Opportunity cost is the revenue forgone of $4 by selling internally. Revenue forgone of $4 = $10 market price – $6 variable cost. The economic transfer pricing rule works well when outside market prices are available (see Note 11.50 “Business in Action 11.5”).
