Spice Company Has Two Divisions,Parsley and Sage

question 112

Multiple Choice

Spice Company has two divisions,Parsley and Sage.Parsley produces a unit that Sage could use in its production.Sage currently is purchasing 50,000 units from an outside supplier for $50.Parsley is operating at less than full capacity and has variable costs of $27 per unit.The full cost to manufacture the unit is $38.Parsley currently sells 450,000 units at a selling price of $54.If an internal transfer is made,variable shipping and administrative costs of $2 per unit could be avoided.What would be the maximum transfer price?

• A)$25
• B)$27
• C)$38
• D)$50

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Definitions:

Common Stock Dividends Distributable

A liability account representing dividends declared by a company but not yet distributed to common stockholders.

Stock Split

A corporate action to increase the number of outstanding shares by dividing each share, which typically makes the stock more affordable.

Common Stock

A form of corporate equity ownership, representing a claim on a portion of the corporation's assets and earnings.

Stock Dividend

A dividend payment made in the form of additional shares of the company's stock rather than cash.