Kitty City Company's Canned Foods division has collected the following information: Normal selling price $3.90 per can
Variable product costs 2.20 per can
Fixed product costs .80 per can
Variable selling and administrative costs .30 per can
Production capacity 2,500,000 cans
The Canned Foods division is currently producing 2,000,500 cans.The company's Dinner Pack division wants to buy 350,000 cans.The minimum transfer price would be

Question

Quizplus · Accepted Answer

The minimum transfer price should cover the variable costs, which are $2.20 (variable product costs) + $0.30 (variable selling and administrative costs) = $2.50 per can.

Kitty City Company's Canned Foods Division Has Collected the Following