Alto Company consists of the Red River Division and the White Mountain Division. Red River produces and sells 100 pound bags of pottery clay which can either be sold to outside customers or to White Mountain. The following data are available from the last year:Red River:Product capacity in 100 lb. bags. 18,000 unitsSelling price per bag to outside customers $ 20Variable product cost per bag 10Variable selling cost per bag 4White Mountain:Number of bags needed annually 6,000 unitsPrice per bag paid to an outside supplier $ 16By selling to White Mountain, Red River will avoid $3 per bag in selling costs.a. If Red River sells 18,000 bags annually to outside customers, what transfer price would be computed using the formula? Show calculations.
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