The Alpha Division of a Company, Which Is Operating at Capacity

question 131

Multiple Choice

The Alpha Division of a company, which is operating at capacity, produces and sells 1,000 units of a certain electronic component in a perfectly competitive market. Revenue and cost data are as follows: (CIA adapted)
$$\begin{array} { l r } \text { Sales } & \$ 50,000 \\\text { Variable costs } & 34,000 \\\text { Fixed costs } & 12,000\end{array}$$
The minimum transfer price that should be charged to the Beta Division of the same company for each component is:

• A) $12.
• B) $34.
• C) $46.
• D) $50.

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Definitions:

Boil Temperatures

The temperature at which a liquid turns into vapor, which varies depending on the atmospheric pressure and the liquid's properties.

A/C Circuit

An alternating current (A/C) circuit, in which the flow of electric charge periodically reverses direction, typically used in household and industrial power.

Condenser

In automotive contexts, a heat exchanger component in the air conditioning system that cools and condenses refrigerant gas back into a liquid.