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What is price per ton that the pulp division should charge

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Question - Verbena Company has two divisions, Pulp Division and Carton Division. Carton Division would like to buy 15,000 tons of pulp from Pulp Division. Currently, Pulp Division is operating at full capacity and is making 50,000 tons of pulp per month. Costs of pulp are as follows:

Variable costs $79 per ton

Fixed costs $20 per ton

The company uses a cost-based transfer pricing and its policy is to set a transfer price of pulp at a 17% markup to the pulp's full costs.

Required - Based on the company's policy, what is the price per ton that the Pulp Division should charge the Carton Division?

Reference no: EM132543127

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