Image for The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumbe
ID: 2599880 • Letter: I
Question
Image for The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers or within the company to the Construction Division. The following data have been gathered for the coming period: If the Lumber Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs. If current outside sales are 150,000 board feet, what is the minimum transfer price that the Lumber Division could accept?
Explanation / Answer
Answer:
Transfer price = Sale price to outside customer – Saving in cost
= Sale price to outside customer – 0.35