Answer the Following Questions Using the Information Below:
NSW Farmers

question 91

Multiple Choice

Answer the following questions using the information below:
NSW Farmers Coop has two divisions: Distribution and Production.The company's primary product is fertiliser.Each division's costs are provided below:
$$\begin{array} { l r l } \text { Production: } & \text { Variable costs per kilo } & \$ 0.05 \\& \text { Fixed costs per kilo } & \$ 0.25 \\\text { Distribution: } & \text { Variable costs per kilo } & \$ 0.03 \\& \text { Fixed costs per kilo } & \$ 0.02\end{array}$$ The Distribution Division has been operating at a capacity of 4 000 000 kilos a week and usually purchases 2 000 000 kilos from the Production Division and 2 000 000 kilos from other suppliers at $0.45 per kilo.
-What is the transfer price per kilo from the Production Division to the Distribution Division,assuming the method used to place a value on each kilo of fertiliser is 120% of full costs,what is the transfer price per kilo from the Production Division to the Distribution Division?

• A)$0.55
• B)$0.36
• C)$0.30
• D)$0.45

---

Definitions:

Expected Expenses

Anticipated costs or expenditures that a company or individual forecasts to occur over a specific period, based on historical data and projected budgets.

Raw Materials Inventory

Raw materials inventory accounts for the total cost of all components and materials that are yet to be used in the manufacturing process.

Budgeted Production

The quantity of products a company plans to produce over a specific period, based on forecasted sales and inventory levels.