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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 $22 $12 Variable Fixed (based on a capacity of 6 18 100,000 tons per year) Net operating income $4 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 Division is currently purchasing 28,000 tons of pulp per year from a supplier at a cost of $22 per ton, less a 10% purchase discount. Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out." For Requirement 1 through 2 below, assume that the Pulp Division can sell all of its pulp to outside customers for $22 per ton
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