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:

Change In Estimate

An adjustment made to the accounting records to reflect new information or subsequent changes in judgments regarding financial statement estimates.

Depreciation Expense

The systematic allocation of the depreciable amount of an asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Correction

A process of adjusting or rectifying errors in financial statements or any documents.

Intangible Assets

Assets that lack physical substance and represent legal rights or competitive advantages (e.g., trademarks, patents).