Corrugated, Inc The Box Division Has Capacity to Make 500,000 Boxes Per

Multiple Choice

Corrugated, Inc.Corrugated, Inc. has many divisions that are evaluated on the basis of ROI. One division, the Box Division, makes boxes. The Candy Division makes candy and needs 50,000 boxes per year. The Box Division incurs the following costs for one box: $$\begin{array} { l c } \text { Direct materials } & \$ 0.20 \\\text { Direct labour } & 0.70 \\\text { Variable overhead } & 0.10 \\\text { Fixed overhead } & \underline { 0.23 } \\\text { Total } & \underline { \$ 1.23 }\end{array}$$ The Box Division has capacity to make 500,000 boxes per year. The Candy Division currently buys its boxes from an outside supplier for $1.40 each (the same price that the Box Division receives) .
-Refer to Corrugated, Inc. Assume the company mandates that any transfers take place at full manufacturing cost. What would be the transfer price if the Box Division transferred boxes to the Candy Division?

A) $0.90
B) $1.00
C) $1.23
D) $1.40