The readings in my accounting book doesn’t really help me solve this question. Please help. Thank you!
The Post Division of the M.T. Woodhead Company produces basic posts which can be sold to outside customers or sold to the Lamp Division of the M.T. Woodhead Company. Last year the Lamp Division bought all of its 29,400 posts from Post at $1.50 each. The following data are available for last year’s activities of the Post Division:
Capacity in units 305,000 posts
Selling price per cost to outside customers $1.90
Variable costs per post $0.80
Fixed costs, total $241,000
The total fixed costs would be the same for all the alternatives considered below. Suppose the transfers of posts to the Lamp Division cut into sales to outside customers by 17,500 units. What is the lowest transfer price that would not reduce the profits of the Post Division? (Round your intermediate calculations and final answer to 2 decimal places.)