(Two-part problem) Chemical Company has two divisions, the M…
(Two-part problem) Chemical Company has two divisions, the Mixing Division and Bottling Division. The Bottling Division would like to buy from the Mixing Division. Standard costs for the Mixing Division are as follows: Direct materials $3.00 per gallon Direct labor $2.40 per gallon Variable overhead $3.60 per gallon Variable M&A $0.50 per gallon Fixed M&A $ 5,000 Fixed OH $20,000 The Mixing Division has production capacity of 20,000 gallons. The Bottling Division would like to buy 2,000 gallons from the Mixing Division. If the Mixing Division sells to the Bottling Division, it can avoid variable marketing and administrative expenses. The Mixing Division currently sells its product at $15 per gallon. If the Mixing Division is selling at capacity, what is the minimum transfer price it would be willing to accept?