Freberg Company, a division of Dudge Cars, produces automotive batteries. Freberg sells the batteries to its customers for $92 per unit. The variable cost per unit is $42, and fixed costs per unit are $16. Top management of Dudge Cars would like Freberg to transfer 30,000 batteries to another division within the company at a price of $54. Freberg is operating at full capacity. Compute the minimum transfer price that Freberg should accept.

Minimum transfer price: $_____

To compute the minimum transfer price that Freberg should accept, we need to consider the opportunity cost of transferring 30,000 batteries to another division within the company.

Since Freberg is operating at full capacity, transferring 30,000 batteries would mean that it has to forgo the sales revenue and contribution margin it would have earned by selling those batteries to external customers.

First, let's calculate the contribution margin per unit:

[tex]\[ \text{Contribution Margin per unit} = \text{Selling price per unit} - \text{Variable cost per unit} \]\[ \text{Contribution Margin per unit} = \$92 - \$42 = \$50 \][/tex]

This means for each unit sold externally, Freberg earns a contribution margin of \$50.

Now, let's calculate the total contribution margin for 30,000 units:

[tex]\[ \text{Total Contribution Margin} = \text{Contribution Margin per unit} \times \text{Number of units} \]\[ \text{Total Contribution Margin} = \$50 \times 30,000 = \$1,500,000 \][/tex]

This represents the total contribution margin Freberg would lose by transferring 30,000 units internally.

The minimum transfer price that Freberg should accept should compensate for this loss in contribution margin. Therefore, the minimum transfer price would be the variable cost per unit plus the contribution margin per unit that Freberg would forego:

[tex]\[ \text{Minimum Transfer Price} = \text{Variable cost per unit} + \text{Contribution Margin per unit} \]\[ \text{Minimum Transfer Price} = \$42 + \$50 = \$92 \][/tex]

So, the minimum transfer price that Freberg should accept is $92 per unit. This ensures that Freberg is not worse off by transferring units internally compared to selling them externally.