Given the Following Data for Electrical Cord Division Assume That the Electrical Cord Division Is Selling All It

question 89

Multiple Choice

Given the following data for Electrical Cord Division:
$$\begin{array} { l r } \text { Selling price to outside customers } & \$40 \\\text { Variable cost per unit } & 30 \\\text { Total fixed cost } & 10,000 \\\text { Capacity (in units) } & 2,000\end{array}$$
Assume that the Electrical Cord Division is selling all it can produce to outside customers. If it sells to the Appliance Division, $1 can be avoided in variable cost per unit. The Appliance Division is presently purchasing from an outside supplier at $38 per unit. From the point of view of the company as a whole, any sales to the Appliance Division should be priced at:

• A) $40.
• B) $39.
• C) $38.
• D) The company would not want the transfer to take place.

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Definitions:

Salvage Value

Salvage value is the estimated resale value of an asset at the end of its useful life, considered in depreciation calculations.

Depreciation Expense

Distributing the cost of a material asset methodically across its productive life.

Units-Of-Activity

A depreciation method that allocates the cost of an asset over its useful life based on the number of units it produces or hours it is used.

Salvage Value

An asset's projected financial value at the end of its viability period.