Reference no: EM132542034

Use the following information to answer questions below:

Capacity of supplying division 43,750

Market sell price (per tonne) $1,340

Cost of production:

Variable cost (mfg)

Variable labour $170

Variable material $340

Variable overhead $20

Total variable mfg costs $530

Fixed cost (mfg) $300

Total manufacturing costs $830

Other costs:

Sales and admin costs $107

(applies to all external sales)

Question a) Calculate margin (profit) on external sales using both variable AND absorption costing per unit (Note contribution margin applies if variable cost is used and profit is used if absorption costing is used)

Using the general transfer pricing rule (GTPR) complete the following:

Question b) If the external demand was 27,000 units and the internal division required 17,750 units, what would be the total transfer price (and calculate average price per unit) to the internal division.