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Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price Expenses $ 20 Variable Fixed (based on a capacity of 102,000 tons per year) $ 11 6 17 $ 3 Net operating income Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton D vision is currently purchasing 3 000 ons of pulp per year ro m a supplier a a cost of S20 per to less a %purchased count u ecs resident an ! us r the Carton Division to begin purchasing its pulp from the PulpDivision if an acceptable transfer price can be worked out Required For (1) and (2) below, assume that the Pulp Division can sell all of its pulp to outside customers for $20 per ton. 1-a. What is the minimum Transfer Price at which Pulp is willing to sell within the firm? Transfer price 2
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