Spring Corp

question 31

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 less than full capacity,what would be the minimum transfer price Daffodil would accept for an internal transfer?

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

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Definitions:

Form Utility

The value added to goods through a change in form, shape, or appearance, to make them more useful or appealing.

Raw Materials

Basic substances in their natural, modified, or semi-processed states, used as inputs to a production process for manufacturing finished goods.

Quality Control

A process through which a business seeks to ensure that product quality is maintained or improved and manufacturing errors are reduced or eliminated.

Visual Inspection

The process of examining objects, components, or materials for defects using human sight, sometimes assisted by optical instruments.