Chipper Division of Acme Corp

question 7

Multiple Choice

Chipper Division of Acme Corp.sells 80,000 units of part Z-25 to the outside market.Part Z-25 sells for $40,has a variable cost of $22,and a fixed cost per unit of $10.Chipper has a capacity to produce 100,000 units per period.Jones Division currently purchases 10,000 units of part Z-25 from Chipper for $40.Jones has been approached by an outside supplier willing to supply the parts for $36.If Acme uses a negotiated transfer pricing system,what is the maximum transfer price that should be charged for this transaction?

• A)$40.
• B)$36.
• C)$32.
• D)$22.

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Definitions:

Impulse Gratification

The act of satisfying an immediate desire or urge, often without consideration of the long-term consequences.

Superego

In psychoanalytic theory, the part of the personality responsible for moral standards and ideals, functioning to suppress the urges of the id and striving to act in a socially acceptable manner.

High Standards

Expectations or criteria that are significantly above average, often demanding excellence in performance or quality.

Rigid

Characterized by being inflexible or unyielding; not adaptable or flexible.