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Bonita Appraisal

Price: $1.99


The Appraisal Department of Bonita Bank performs appraisals of business properties
for loans being considered by the bank and appraisals for home buyers that are financing
their purchase through some other financial institution. The department charges $162 per
home appraisal, and its variable costs are $130 per appraisal.

Recently, Bonita Bank has opened its own Home-Loan Department and wants the
Appraisal Department to perform 1,200 appraisals on all Bonita Bank–financed home loans.
Bank management feels that the cost of these appraisals to the Home-Loan Department
should be $150. The variable cost per appraisal to the Home-Loan Department would be
$6 less than those performed for outside customers due to savings in administrative costs.

Instructions
(a) Determine the minimum transfer price, assuming the Appraisal Department has excess
capacity.
(b) Determine the minimum transfer price, assuming the Appraisal Department has no
excess capacity.

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