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 $162.29 per home appraisal, and its variable costs are $129.67 per appraisal.
Recently, Bonita Bank has opened its own Home-Loan Department and wants the Appraisal Department to perform 1,240 appraisals on all Bonita Bank-financed home loans. Bank management feels that the cost of these appraisals to the Home-Loan Department should be $150.13. The variable cost per appraisal to the Home-Loan Department would be $5.61 less than those performed for outside customers due to savings in administrative costs.Determine the minimum transfer price, assuming the Appraisal Department has excess capacity.