Question
The Grain Division of Wholesale Grains produces oat grain with the following characteristics: Capacity in bushels 90,000 Selling price per bushel $22 Variable cost per
The Grain Division of Wholesale Grains produces oat grain with the following characteristics:
Capacity in bushels 90,000
Selling price per bushel $22
Variable cost per bushel $10
Fixed cost per bushel $4
The Cereal Division within the same company would like to buy the oat grain from the Grain Division. It is now purchasing its oat grain from an outside supplier for $20 per bushel. If the Grain Division sells to the Cereal Division, $3 in variable costs can be avoided. The Grain Division is currently operating at capacity and selling all production outside the company. If the Grain Division decides to sell to the Cereal Division, what is the minimum transfer price per bushel?
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