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What is the maximum amount Cologne Division

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Reference no: EM132529609

Question - Fragrance Pty Ltd has two divisions: the Cologne Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Cologne Division. The Bottle Division's variable manufacturing cost per unit is $2.00 and shipping costs are $0.10 per unit. The Bottle Division's external sales price is $3.00 per unit. No shipping costs are incurred on sales to the Cologne Division. The Cologne Division can purchase similar bottles in the external market for $2.50. Assume the Bottle Division has no excess capacity and can sell everything produced externally. What is the maximum amount Cologne Division would be willing to pay for the bottles?

A. $2.90

B. $2.50

C. $2.10

D. $2.00

Reference no: EM132529609

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