Springer Company Produces and Sells Home-Ground Wheat Flour

question 151

Essay

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 bakery,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?

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Definitions:

Countershock

(In cardiology) A high-intensity, short-duration, electric shock applied to the area of the heart, resulting in total cardiac depolarization.

Cardiac Depolarization

An event in the cardiac cycle where the heart's muscle cells become electrically charged, leading to muscle contraction and heartbeat.

Mechanical

Pertaining to machinery.

Fifth Intercostal Space

The area between the fifth and sixth ribs, often used as a reference point for certain medical procedures or examinations.