Dynamic Engine Corporation the Motor Division of Dynamic Engine Corporation

question 89

Multiple Choice

Dynamic Engine Corporation The Motor Division of Dynamic Engine Corporation uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of Dynamic Engine Corporation manufactures the exact type of carburetor that the Motor Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is:
Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally.
Refer to Dynamic Engine Corporation. What is the maximum of the transfer price range for a transfer between the two divisions?

• A) $106
• B) $100
• C) $90
• D) $70

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Definitions:

Sales Volume Variance

A measure used to assess the impact of the difference between actual sales volume and budgeted sales volume on revenue.

Master Products

Essential or core products that a company offers, which define its primary business operations.

Standard Costing

An accounting method used to estimate the cost of production by assigning standard costs for materials and labor, used for budgeting and controlling expenses.

Cost Comparisons

The process of comparing the costs of different options or strategies to determine the most economically viable choice.