Question

Valkyrie company has two divisions, Pulp Division and Carton Division. Carton Division would like to buy 25,000 tons of pulp from Pulp Division. Currently, Pulp Division is operating at full capacity and is making 50,000 tons of pulp per month. Costs of pulp are as follows:

Variable costs	$35 per ton
Fixed costs	$10 per ton

The company uses a cost-based transfer pricing and its policy is to set a transfer price of pulp at a 27% markup to the pulp's full costs.

Q:) Based on the company's policy, what is the price per ton that the Pulp Division should charge the Carton Division?

(Do not round intermediate calculations. Round the final numbers to two decimal places.)  

A:) $ _______per ton??

Answer 1

Solution:
CALCULATION OF TRANSFER PRICE PER TON
Transfer Price - Full Cost + 27% Markup
Particulars	Amount
Variable Cost Per Ton	$           35.00
Fixed Cost Per Ton	$           10.00
Total Cost	$           45.00
Add: Markup 27% of $ 45	$           12.15
Transfer Price	$           57.15
Answer = $ 57.15 Per Ton