industry. Divisions B and C are two of its divisions. Division B sells a fertiliser product (BF) to customers external to
B．AG. Division C produces a chemical (CC) which it could transfer to Division B for use in the manufacture of its
product BF. However, Division C could also sell some of its output of chemical CC to external customers of BAG.
A．n independent external supplier to The Better Agriculture Group has offered to supply Division B with a chemical
which is equivalent to component CC. The independent supplier has a maximum spare capacity of 60,000 kilograms
of the chemical which it is willing to make available (in total or in part) to Division B at a special price of $55 per
kilogram.
F．orecast information for the forthcoming period is as follows:
D．ivision B:
Production and sales of 360,000 litres of BF at a selling price of $120 per litre.
Variable conversion costs of BF will amount to $15 per litre.
F．ixed costs are estimated at $18,000,000.
C．hemical (CC) is used at the rate of 1 kilogram of CC per 4 litres of product BF.
D．ivision C:
Total production capacity of 100,000 kilograms of chemical CC.
Variable costs will be $50 per kilogram of CC.
F．ixed costs are estimated at $2,000,000.
Market research suggests that external customers of BAG are willing to take up sales of 40,000 kilograms of CC at a
price of $105 per kilogram. The remaining 60,000 kilograms of CC could be transferred to Division B for use in
product BF. Currently no other market external to BAG is available for the 60,000 kilograms of CC.
Required:(a) (i) State the price/prices per kilogram at which Division C should offer to transfer chemical CC to Division
B． in order that the maximisation of BAG profit would occur if Division B management implement rational
sourcing decisions based on purely financial grounds.
Note: you should explain the basis on which Division B would make its decision using the information
available, incorporating details of all relevant calculations. (6 marks)
And,as more children were born,more food 4 (need),Agriculture gave people thei
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