Fragrance Pty Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Perfume Division which produces perfume. The following information relates to the production of bottles.

Bottle Division

Production capacity50,000

50,000Internal demand from Perfume Division47,000

47,000External demand15,000

15,000Market price($)

($)3

3Variable costs per unit($)

($):-Processing cost2.0

2.0-Shipping cost0.1

0.1Fixed cost per month($)

($)25,000

25,000

Question 1

Calculate the total opportunity cost Bottle Division will incur if they meet the internal demand from Perfume Division

Question 2

Calculate the transfer price of one bottle using the general transfer-pricing formula. Please round your answer to 2 dec places.