Question
Greenland Ltd. has two divisions, Distribution and Production. The company's primary product is fertilizer. Each division's costs are provided below: Production: Variable costs per kilogram
Greenland Ltd. has two divisions, Distribution and Production. The company's primary product is fertilizer. Each division's costs are provided below: Production: Variable costs per kilogram $0.05 Fixed costs per kilogram $0.25 Distribution: Variable costs per kilogram $0.03 Fixed costs kilogram $0.02 The Distribution Division has been operating at a capacity of 4,000,000 kilograms a week and usually purchases 2,000,000 kilograms from the Production Division and 2,000,000 kilograms from other suppliers at $0.45 per kilogram. What is the transfer price per kilogram from the Production Division to the Distribution Division, assuming the method used to place a value on each kilogram of fertilizer is 120% of full costs? a. $0.30 b. $0.55 c. $0.45 d. $0.42 e. $0.36
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started