Given the Following Information for Camping Division The Lantern Division Would Like to Purchase Internally from the l

question 40

Multiple Choice

Given the following information for Camping Division:
$$\begin{array} { l l } \text { Selling price to outside customers } & \$ 50 \\\text { Variable cost per unit } & \$ 30 \\\text { Total fixed costs } & \$ 400,000 \\\text { Capacity in units } & 25,000\end{array}$$
The Lantern Division would like to purchase internally from the Camping Division. The Lantern Division now purchases 5,000 units each period from outside suppliers at $49 per unit. The Camping Division has ample excess capacity to handle all of the Lantern Division's needs. What is the lowest price that the Camping Division could accept?

• A) $50.00.
• B) $49.00.
• C) $46.00.
• D) $30.00.

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Definitions:

Finishing Department

The section in a manufacturing process where products undergo final touches before being considered finished goods.

Predetermined Overhead Rate

An upfront calculated rate for assigning manufacturing overhead costs to products or job orders, based on estimated expenses and levels of activity.

Direct Labor-Hours

Combined working hours of staff directly participating in the manufacturing of products or provision of services.

Job-Order Costing System

An accounting system that tracks costs individually for each job, suitable for companies producing unique products or services.