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What is the maximum transfer price that division y would be

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A company has two divisions: Division X and Division Y. Both divisions are profit centres. Division X can produce up to 111170 kilograms of plastic per year. Division Y needs 43972 kilograms of plastic in order to manufacture different products. The market price is $5.15 per kilogram of plastic.

The following costs pertain to Division X:

Variable manufacturing costs per kilogram         $3.16

Fixed manufacturing costs per kilogram                 6.75

Problem 1: What is the maximum transfer price that Division Y would be willing to pay for the 43972 kilograms bought from Division X if Division X expects to be operating at full capacity this year?

Select one:

a. $3.16
b. $5.15
c. $9.91
d. $6.75

Reference no: EM132795405

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