Question
Pharoah Company produces and sells home-ground wheat flour. The flour mill division sells to the general public in its outlet store located at the mill.
Pharoah Company produces and sells home-ground wheat flour. The flour mill division sells to the general public in its outlet store located at the mill. The mill division also is the supplier of flour for its bakery division located across the street from the flour mill. The following information has been collected by Pharoahs controller for the flour mill division:
Production capacity | 20,600 | pounds | |
Selling price | $0.96 | per pound | |
Variable production cost | $0.26 | per pound | |
Variable selling cost | $0.14 | per pound |
The bakery needs 6,600 pounds of flour. If the flour mill transfers flour to the bakery, it can avoid $0.09 of the variable selling cost.
If the flour mill can only sell 12,600 pounds at its outlet store to outside customers, what is the lowest acceptable transfer price per pound that the flour mill division should accept?
$ per pound
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