What internal price should be set to transfer a pound

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Reference no: EM133417506

Case: Katsen Coffee has two divisions, Roasting and Brewing. The Roasting division can sell its products to an external market for $15 per unit. The division's variable manufacturing costs are $4.5 per pound and fixed manufacturing costs are $0.90 per pound.

Question: Using the economic rule of transfer pricing, what internal price should be set to transfer a pound of coffee from the Roasting division to the Brewing division? Assume there is sufficient capacity to support the internal transfer.

Reference no: EM133417506

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