Penrith Chocolate Company Makes Internal Transfers at 160% of Full

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