Peterson & Sons is a baked-goods manufacturing firm. Peterson has two main divisions: Packaged Mixes and Finished Desserts. The Finished Desserts division is considering purchasing the mix for its cakes from an outside supplier.

The Packaged Mixes department incurs the following costs for each batch of cake mix:

Direct Materials	$400
Direct Labor	$150
Variable Overhead	$250
Fixed Overhead	$150

In addition to the cost of the cake mix, the Finished Desserts Department would incur the following costs for each batch of cakes:

Direct Materials	$120
Direct Labor	$200
Variable Overhead	$300
Fixed Overhead	$130

ALTERNATIVE 1: The current market price from an outside supplier for the quantity of mix needed by the Finished Desserts department is $1,000. The finished cakes from each batch of mix will sell for $2,000.

Assume the Packaged Mixes department has excess capacity. What is the minimum transfer price for which the two departments could agree on a price to maximize Peterson & Sons profit? [ Select ]

What is the maximum transfer price for which the two departments could agree on a price to maximize Peterson & Sons profit? [ Select ]

ALTERNATIVE 2: Currently, the Packaged Mixes department has excess capacity. Peterson currently sells the mix for $1,000 per batch. The Finished Desserts department is able to purchase the mix for $700 from an outside supplier. The finished cakes from each batch will sell for a total of $2,000.

Based on the decision that will maximize the overall benefit to Peterson & Sons, what is the contribution margin per batch that can be realized by the Finished Desserts department? [ Select ]

Alternative 3: Currently, the Packaged Mixes department is producing at full capacity and would need to decrease production in another area in order to provide cake mix to the Finished Desserts department. Management estimates that $250 of contribution margin would be lost by the decrease in other areas. The current market price for the quantity of mix needed by the Finished Desserts department is $1,000: this is the price at which Peterson can purchase the mix from an outside supplier. The finished cakes from each batch will sell for $2,000.

Based on the decision that will maximize the overall benefit to Peterson & Sons, what is the contribution margin per batch that can be realized by the Finished Desserts department? [ Select ]