The Can Division of Fruit Products Inc. manufactures and sells tin cans externally for $0.60 per can. Its unit variable costs and unit fixed costs are $0.24 and $0.08, respectively. The Packaging Division wants to purchase 50,000 cans at $0.32 a can. Selling internally will save $0.02 a can.
Assuming the Can Division is already operating at full capacity, what is the minimum transfer price it should accept?
a) $0.58
b) $0.28
c) $0.34
d) $0.66
a) $0.58
Business
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