PhilcoLumber Company manufacturing wood pulp for the production of several paper products . Sales are expected to be 50,000 tons this year, and the following figures were estimated for budgeting purposes:

Sales (50,000 tons) $3,500,000

Variable costs 2,100,000

Contribution Margin 1,400,000

Fixed Costs 900,000

Net Income $ 500,000

Philco company has just purchased Bobco Box Company, a smaller company that makes cardboard boxes. This new company will be treated as a division of Philco Lumber with full profit responsibilities.

Bobco is currently buying 5,000 tons of wood pulp from another supplier for $70 per ton. The CEO of Philco wants the new company to begin purchasing pulp from his factory, and has asked the managers both companies to arrange a transfer price.

Scenario #1: Bobco box has received a special order for very sturdy packing boxes. but cannot find an outside supplier who can deliver the special pulp required to make these boxes. However, the Philco factory can make this special pulp at a variable cost of $ 58 per ton. This pulp requires more Machine Hours (MH's) than regular pulp, so instead of producing 50,000 tons of regular pulp this year, they will only able to produce 44,000 tons. In addition, Philco would have to rent a special heavy duty cardboard stapling machine for $16,000.

a. Bobco box needs 4,000 tons of special pulp. If all Philco divisions requires 15% mark up on cost, what is the minimum price Philco Can charge for this special pulp?