Tiffany Company Has Two Divisions,Gold and Silver

question 97

Multiple Choice

Tiffany Company has two divisions,Gold and Silver.Gold produces a unit that Silver could use in its production.Silver currently is purchasing 50,000 units from an outside supplier for $25.Gold is operating at less than full capacity and has variable costs of $13.50 per unit.The full cost to manufacture the unit is $20.Gold currently sells 450,000 units at a selling price of $27.If an internal transfer is made,variable shipping and administrative costs of $1 per unit could be avoided.How much profit will Gold receive from the transfer if a transfer price of $22.50 is agreed upon?

• A)$225,000
• B)$275,000
• C)$500,000
• D)$725,000

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, allowing for more accurate budgeting in variable cost situations.

Activity Variances

Discrepancies between planned or standard costs to perform an activity and the actual costs incurred.

Jeep Tours

Customized tours offered to tourists that utilize jeeps to navigate terrain that is typically not accessible by standard vehicles, often in natural or adventure settings.

Revenue Variances

The difference between actual revenue and expected revenue over a specific period, often analyzed to understand performance.