Spring Corp

question 17

Multiple Choice

Spring Corp.has two divisions,Daffodil and Tulip.Daffodil produces a gadget that Tulip could use in its production.Tulip currently purchases 100,000 gadgets for $12.50 on the open market.Daffodil's variable costs are $6 per widget while the full cost is $9.35.Daffodil sells gadgets for $13 each.If Daffodil is operating at capacity,what would be the maximum transfer price Tulip would pay internally?

• A)$6.00
• B)$9.35
• C)$12.50
• D)$13.00

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Definitions:

Instrumentation

The process or technique of designing, selecting, or using instruments, especially for scientific measurement or experimental research.

Regression

A statistical method used to determine the strength and character of the relationship between one dependent variable and one or more independent variables.

Hawthorne Effect

The phenomenon where subjects alter their behavior simply because they are aware that they are being observed.

Random Errors

Errors in measurement that lead to inconsistent results, often caused by unpredictable and uncontrollable factors.