Tiffany Company Has Two Divisions,Gold and Silver

question 107

Multiple Choice

Tiffany Company has two divisions,Gold and Silver.Gold produces a unit that Silver could use in its production.Silver currently is purchasing 50,000 units from an outside supplier for $25.Gold is operating at less than full capacity and has variable costs of $13.50 per unit.The full cost to manufacture the unit is $20.Gold currently sells 450,000 units at a selling price of $27.If an internal transfer is made,variable shipping and administrative costs of $1 per unit could be avoided.How much will Silver save by not purchasing from outside if a transfer price of $22.50 is agreed upon?

• A)$225,000
• B)$250,000
• C)$175,000
• D)$125,000

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Definitions:

Hyperinflation

An extremely high and typically accelerating inflation rate, often exceeding 50% per month, eroding the real value of the local currency.

Extraordinarily High Inflation

A situation where the price level rises at an excessively rapid rate, severely eroding purchasing power over a short period.

Money Creation

The process by which the money supply of a country or an economic or monetary region is increased.

Government Spending

The total expenditure incurred by a government in funding its operations and services, including infrastructure, public services, and welfare programs.