Division R sells one of its products to division S in the same group. The product cost consists of $160 for materials, $60 for direct labour, $10 for variable overhead and $110 for fixed overhead. R division sets its profit margin equal to 40% of the variable cost. What is the ideal transfer price if R is operating at full capacity?

Practice Question 1 options:

a)$160

b)$230

c)$432

d)$34