Springer Company produces and sells home-ground wheat flour. The flour mill division sells to the general public in its outlet store located at the mill. The mill division also is the supplier of flour for its bakery division located across the street from the flour mill. The following information has been collected by Springer’s controller: Production capacity 20,000 pounds Selling price $0.90 per pound Variable production cost $0.20 per pound Variable selling cost $0.08 per pound Number of pounds needed by the bakery 6,000 If the flour mill transfers flour to the baker, it can avoid $0.03 of the variable selling cost. Required: a. if the flour mill can only sell 12,000 pounds at its outlet store to outside customers, what is the lowest acceptable transfer price per pound that the flour mill division should accept? b. If the flour mill can sell all 20,000 pounds at its outlet store to outside customers, what is the lowest acceptable transfer price per pound the flour mill division should accept? Please avoid solutions in image format thank you
Springer Company produces and sells home-ground wheat flour. The flour mill division sells to the general public in its outlet store located at the mill. The mill division also is the supplier of flour for its bakery division located across the street from the flour mill. The following information has been collected by Springer’s controller: Production capacity 20,000 pounds Selling price $0.90 per pound Variable production cost $0.20 per pound Variable selling cost $0.08 per pound Number of pounds needed by the bakery 6,000 If the flour mill transfers flour to the baker, it can avoid $0.03 of the variable selling cost. Required:
a. if the flour mill can only sell 12,000 pounds at its outlet store to outside customers, what is the lowest acceptable transfer price per pound that the flour mill division should accept?
b. If the flour mill can sell all 20,000 pounds at its outlet store to outside customers, what is the lowest acceptable transfer price per pound the flour mill division should accept?
Please avoid solutions in image format thank you
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