Answer the following question(s)using the information below:
Greenlawn Ltd.has two divisions, Distribution and Production.The company's primary product is fertilizer.Each division's costs are provided below:
The Distribution Division has been operating at a capacity of 4,000,000 kilograms a week and usually purchases 2,000,000 kilograms from the Production Division and 2,000,000 kilograms from other suppliers at $0.45 per kilogram.
-What is the transfer price per kilogram from the Production Division to the Distribution Division, assuming the method used to place a value on each kilogram of fertilizer is 160% of variable costs?
A)$0.05
B)$0.11
C)$0.08
D)$0.40
E)$0.48

Question

Answer the following question(s)using the information below:
Greenlawn Ltd.has two divisions, Distribution and Production.The company's primary product is fertilizer.Each division's costs are provided below:
  The Distribution Division has been operating at a capacity of 4,000,000 kilograms a week and usually purchases 2,000,000 kilograms from the Production Division and 2,000,000 kilograms from other suppliers at $0.45 per kilogram.
-What is the transfer price per kilogram from the Production Division to the Distribution Division, assuming the method used to place a value on each kilogram of fertilizer is 160% of variable costs?
A)$0.05 
B)$0.11 
C)$0.08 
D)$0.40 
E)$0.48

Quizplus · Accepted Answer

To calculate the transfer price, first, we need to find the variable cost per kilogram. Using the given table, the variable cost per kilogram for the Production Division is $0.05. 
Next, we use the given method of placing a value on each kilogram of fertilizer at 160% of variable costs. 
160% of $0.05 = $0.08 
Therefore, the transfer price per kilogram from the Production Division to the Distribution Division is $0.08. 
Therefore, the best choice is C as it provides the correct transfer price calculation.

Answer the Following Question(s)using the Information Below