Answer:
Minimum transfer price = $1.17
Explanation:
The Can Division is operating at full capacity, hence it has no excess capacity .
This implies that it can not produce enough to meet both the internal and external buyers.
Since Division X can not accommodate the demands of the Packaging Division at a price lower than the external price, because it will result to a loss in contribution.
To maximize and optimize the group profit
Minimum transfer price = External selling price - savings in internal transfer cost
= $1.20 - 0.03 = $1.17
Minimum transfer price = $1.17
