Figure 12-3

question 98

Multiple Choice

Figure 12-3. Grey Inc.has many divisions that are evaluated on the basis of ROI.One division,Centra,makes boxes.A second division,Mantra,makes chocolates and needs 80,000 boxes per year.Centra incurs the following costs for one box:
Centra has capacity to make 700,000 boxes per year.Mantra currently buys its boxes from an outside supplier for $1.80 each (the same price that Centra receives) .
Refer to Figure 12-3.Assume that Grey Inc.mandates that any transfers take place at full manufacturing cost.What would be the transfer price if Centra transferred boxes to Mantra?

• A)$1.35
• B)$1.48
• C)$1.00
• D)cannot be determined from the information given
• E)$0.90

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Definitions:

Bank

A financial institution licensed to receive deposits, offer loans, and provide other financial services.

Accounts Payable

Short-term liabilities of a company, representing amounts owed to suppliers or creditors for goods and services received but not yet paid for.

Computer

An electronic device capable of manipulating data or information, allowing for storage, retrieval, and processing to perform various tasks.

Capital

The financial resources available for use, such as cash, goods, or property, invested to create profit.