The Grain Division of Goodness Grains produces oat grain with the following characteristics: $$\begin{array} { l r }
\text { Capacity in bushels } & 90,000 \
\text { Selling price per bushel } & \$ 22 \
\text { Variable cost per bushel } & \$ 10 \
\text { Fixed cost per bushel } & \$ 4
\end{array}$$ The Cereal Division within the same company would like to buy the oat grain from the Grain Division. It is now purchasing its oat grain from an outside supplier for $20 per bushel. If the Grain Division sells to the Cereal Division, $3 in variable costs can be avoided. The Grain Division is currently operating at capacity and selling all production outside the company. If the Grain Division decides to sell to the Cereal Division, what is the minimum transfer price per bushel?

Question

The Grain Division of Goodness Grains produces oat grain with the following characteristics: $$\begin{array} { l r } 
\text { Capacity in bushels } & 90,000 \
\text { Selling price per bushel } & \$ 22 \
\text { Variable cost per bushel } & \$ 10 \
\text { Fixed cost per bushel } & \$ 4
\end{array}$$ The Cereal Division within the same company would like to buy the oat grain from the Grain Division. It is now purchasing its oat grain from an outside supplier for $20 per bushel. If the Grain Division sells to the Cereal Division, $3 in variable costs can be avoided. The Grain Division is currently operating at capacity and selling all production outside the company. If the Grain Division decides to sell to the Cereal Division, what is the minimum transfer price per bushel?

Quizplus · Accepted Answer

The Answer of The Grain Division of Goodness Grains produces oat grain with the following characteristics: $$\begin{array} { l r } 
\text { Capacity in bushels } & 90,000 \
\text { Selling price per bushel } & \$ 22 \
\text { Variable cost per bushel } & \$ 10 \
\text { Fixed cost per bushel } & \$ 4
\end{array}$$ The Cereal Division within the same company would like to buy the oat grain from the Grain Division. It is now purchasing its oat grain from an outside supplier for $20 per bushel. If the Grain Division sells to the Cereal Division, $3 in variable costs can be avoided. The Grain Division is currently operating at capacity and selling all production outside the company. If the Grain Division decides to sell to the Cereal Division, what is the minimum transfer price per bushel?

The Grain Division of Goodness Grains Produces Oat Grain with the Following