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Radom Manufacturing produces various products. The company operates a landfill, which it uses to dispose of nonhazardous trash. The trash is hauled from the two
Radom Manufacturing produces various products. The company operates a landfill, which it uses to dispose of nonhazardous trash. The trash is hauled from the two nearby manufacturing facilities in trucks that can carry up to five tons of trash in a load. The landfill operation requires certain preparation activities regardless of the amount of trash in a truck ie for each load The budget for the landfill for next year follows:
Volume of trash tons loads
Preparation costs varies by loads $
Other variable costs varies by tons
Fixed costs
Total budgeted costs $
Radom plans to make the landfill a profit center and charge the manufacturing plants for disposal of the trash. The landfill has sufficient capacity to operate for at least the next years. Other landfills are available in the area both private and municipal and both Radom manufacturing plants would be free to decide which landfill to use.
Required:
Compute the optimal transfer price.
Compute the total variable costs for a threeton load of trash from one of the plants.
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