Division A sells tomato paste internally to Division B, which, in turn, makes tomato sauce that is

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Division A sells tomato paste internally to Division B, which, in turn, makes tomato sauce that is sold for \($3\) per jar. The costs to manufacture tomato paste are \($2.50\) per kg. Approximately 250 grams of paste are used to make each jar of tomato sauce. Division B incurs an additional \($0.80\) cost per jar to make tomato sauce. If Division A has no other customer to which it can sell the tomato paste, what is the minimum transfer price that Division A should charge Division B per kilogram?

a. $3.00

b. $2.50

c. $1.25

d. $2.05

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Accounting For Managers Interpreting Accounting Information For Decision Making

ISBN: 9781118037966

1st Canadian Edition

Authors: Paul M. Collier, Sandy M. Kizan, Eckhard Schumann

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