Penrith Chocolate Company Makes Internal Transfers at 180% of Full

question 20

Multiple Choice

Penrith Chocolate Company makes internal transfers at 180% of full cost.The Dairy Milk Division purchases 3000 litres of milk per day,on average,from a local supplier who delivers the milk for $3 per litre via an external shipper.To reduce costs,the company located an independent supplier in Tasmania who is willing to sell 3000 litres at $2 each,delivered to Penrith Chocolate Company's Shipping Division in Penrith.The company's Shipping Division has excess capacity and can ship the 3000 litres at a variable cost of $0.25 per litre.What is the total cost to Penrith Chocolate Company if the milk is purchased from the local supplier?

• A)$9000
• B)$6000
• C)$12 000
• D)$9750

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Definitions:

Socially Optimum

The optimal distribution of resources and production from a societal perspective, where social welfare is maximized.

Social Perspective

The viewpoint focusing on how societal contexts influence individuals and groups, including norms, values, and social institutions.

Marginal Private Benefit

The extra advantage gained by either the consumer or producer from the consumption or production of an additional unit of a product or service.

Efficient

Refers to the optimal use of resources to achieve the desired outcome with minimal waste or effort.