Answer the Following Questions Using the Information Below:
NSW Farmers

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 160% of variable costs?

A) $0.11
B) $0.40
C) $0.08
D) $0.05