5,000 tons × $17 per ton = $85,000 increased profits
So long as the selling division has idle capacity, profits in the company
as a whole will increase if internal transfers are made. However, there is
a question of fairness as to how these profits should be split between
the selling and buying divisions. The inflexibility of management in this
situation damages the profits of the Carton Division and greatly en-
hances the profits of the Pulp Division.
Problem 12-22 (60 minutes)
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