could sell its ore at a market price of $265 per tonne, incurring an additional $15 per tonne in selling costs. Consequently, they decide to sell the ore to the Metals division at the market price. If the metals division sell its steel for $650 per tonne, use the following information to calculate the total contribution margin for both divisions. Mining division Metals division
The mining division of Hill End Mining could sell its ore at a market price of $265 per tonne, incurring an additional $15 per tonne in selling costs. Consequently, they decide to sell the ore to the Metals division at the market price. If the metals division sell its steel for $650 per tonne, use the following information to calculate the total contribution margin for both divisions.
|
|
Mining division |
Metals division |
|
$ |
$ |
|
|
Selling price |
265 |
650 |
|
Less: Variable costs: |
||
|
Direct material |
32 |
30 |
|
Direct labour |
65 |
60 |
|
Variable Manufacturing |
71 |
28 |
|
Transfer price |
– |
to be added |
Using the above figures adjust the mining division contribution per unit if sold externally, then apply the transfer pricing general rule to identify the minimum transfer price. The negotiated price range would, therefore, be between $___________ and $______________.
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