(Appendix 12A)The Red River Division of Alto Company produces and sells bags of pottery clay which can either be sold to outside customers or transferred to the White Mountain Division of Alto Company.The following data are available for the last year: By selling to the White Mountain Division, the Red River Division will avoid $3 per bag in selling costs. What is the maximum transfer price the White Mountain Division should be willing to pay?
A)$20 per bag
B)$16 per bag
C)$11 per bag
D)$14 per bag

Question

(Appendix 12A)The Red River Division of Alto Company produces and sells bags of pottery clay which can either be sold to outside customers or transferred to the White Mountain Division of Alto Company.The following data are available for the last year:   By selling to the White Mountain Division, the Red River Division will avoid $3 per bag in selling costs. What is the maximum transfer price the White Mountain Division should be willing to pay?
A)$20 per bag 
B)$16 per bag 
C)$11 per bag 
D)$14 per bag

Quizplus · Accepted Answer

White Mountain Division would be unwilling to pay more than $16 per bag, which is the amount it pays the outside supplier.

(Appendix 12A)The Red River Division of Alto Company Produces and Sells