Wamsley Products, Inc

question 66

Multiple Choice

Wamsley Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below: The Remote Devices Division is currently purchasing 8,000 of these transmitters per year from an overseas supplier at a cost of $61 per transmitter.
Assume that the Transmitter Division is selling all of the transmitters it can produce to outside customers. What should be the minimum acceptable transfer price for the transmitters from the standpoint of the Transmitter Division?

• A) $44 per unit
• B) $27 per unit
• C) $64 per unit
• D) $61 per unit

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Definitions:

Stockholders' Equity

Stockholders' Equity represents the owners' claim after all liabilities have been deducted from total assets. It's also known as shareholders' equity or equity.

Par Value

A nominal or face value assigned to a share of stock by the company's charter, unrelated to the market value.

Paid-In Capital

The amount of money that a company has received from shareholders in exchange for stock, exceeding the par value of the shares.

Common Stock

A type of equity security that represents ownership in a corporation and entitles holders to vote on corporate matters and receive dividends.