Penrith Chocolate Company Makes Internal Transfers at 160% of Full

question 92

Multiple Choice

Penrith Chocolate Company makes internal transfers at 160% of full cost.The Dairy Milk Division purchases 4000 litres of milk per day,on average,from a local supplier who delivers the milk for $2.00 per litre via an external shipper.To reduce costs,the company located an independent supplier in Victoria who is willing to sell 4000 litres at $1.50 per litre,delivered to Penrith Chocolate Company's Shipping Division in Penrith.The company's Shipping Division in Penrith has excess capacity and can ship the 4000 litres at a variable cost of $0.45 per litre.What is the total cost of purchasing the milk from the Victorian supplier and shipping it to the Dairy Milk Division?

• A)$12 480
• B)$7800
• C)$6000
• D)$8000

---

Definitions:

Reaction

A chemical reaction involves the transformation of one or more substances into different substances through the breaking and forming of chemical bonds.

Organic Product

A compound or material which results from the transformation of organic precursors in a chemical reaction, usually in organic synthesis.

Reaction

A process in which substances, the reactants, transform into different substances, the products.

Conversion

The process of changing something into a different form or substance, often used in the context of chemical reactions.