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Find the minimum transfer price from the jar division

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Question - Beauty Ltd has two profit centres: the Face Powder Division and the jar Division. The Jar Division produces jars that can be used by the Face Powder Division. The Jar Division's variable manufacturing cost per unit is $5.00 and shipping costs are $ 1 per unit. The Jar Division's external sales price is $7.00 per unit. No shipping costs are incurred on sales to the Face Powder Division. The Face Powder Division can purchase similar jar in the external market for $6.50.

The Jar Division has operated in full capacity and able to sell all the products to the external market. If Jar division has to sell the product to the Face Powder division, using the general rule, find the minimum transfer price from the Jar Division to the Face Powder Division?

Reference no: EM132623829

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