The Leviathan Steel Company has a coal-mining subsidiary in West Virginia. A substantial amount of the coal

Question:

The Leviathan Steel Company has a coal-mining subsidiary in West Virginia. A substantial amount of the coal produced by the subsidiary is used by Leviathan’s steel foundries located in Pennsylvania.

Required
a. Recommend and defend a transfer price (market price, variable cost, or full cost plus profit) for the coal shipped by the mining subsidiary to the foundries.
b. Indicate how the price you recommended in part a compares with the related to using the coal internally.

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...