Martin Company Currently Manufactures All Component Parts Used in the Manufacturing

question 50

Multiple Choice

Martin Company currently manufactures all component parts used in the manufacturing of various hand tools. The Extruding Division produces a steel handle used in three different tools. The budget for these handles is 120,000 units with the following unit cost:|
$$\begin{array} { l r } \text { Direct material } & \$ 0.60 \\\text { Direct labor } & 0.40 \\\text { Variable overhead } & 0.10 \\\text { Fixed overhead } & 0.20 \\ \text { Total unit cost } & \$ 1.30 \\\end{array}$$
The Polishing Division purchases 20,000 handles from the Extruding Division and completes the hand tools. An outside supplier, Venture Steel, has offered to supply 20,000 units of the handle to the Polishing Division for $1.25 per unit. The Extruding Division currently has idle capacity that cannot be used.
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If Martin Company would like to develop a range of transfer prices, what would be the minimum transfer price that the Extruding Division would be willing to accept?

• A) $1.00.
• B) $1.10.
• C) $1.25.
• D) $1.30.

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Definitions:

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The process of exchanging meaningful and unambiguous information between people from different cultural backgrounds.

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The fair and just distribution of resources and opportunities among all members of a society, aiming to reduce disparities and promote equality.

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Concept that challenges the social structures, processes, and practices associated with inequalities that lead to oppression.