The Lumber Division of Jack Bunyon Homes Inc. produces and sells lumber that can be sold to outside Qualityers or within the company to the Construction Division. The following data have been gathered for the coming period:

Lumber Division:

Capacity 200,000 board feet

Sales price per board foot $2.00

Variable production cost per bd. ft. $1.00

Variable selling costs per bd. ft. $0.40

Construction Division:

Board feet needed 60,000

Outside price paid per bd. ft. $1.60

If the Lumber Division sells to the Construction Division, $0.30 per board foot can be saved in shipping costs.

4,A If current outside sales are 130,000 board feet, what is the minimum transfer price that the Lumber Division could accept?

a. $1.00

b. $1.10

c. $1.40

d. $2.00

4,B If current outside sales are 150,000 board feet, what is the minimum transfer price that the Lumber Division could accept?

a. $1.60

b. $1.30

c. $1.10

d. $1.70

4,C If the Lumber Division has sufficient excess capacity to fulfil the Construction Divisions needs, what will be the effect on the companys overall contribution margin?

a. Decrease by $24,000

b. Decrease by $18,000

c. Increase by $30,000

d. Increase by $27,000