Sandpiper Inc

question 69

Multiple Choice

Sandpiper Inc.has a division that manufactures a component that sells for $150 and has a variable cost of $50.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $20.What is the minimum transfer price if the division is operating at capacity?

• A) $150
• B) $50
• C) $70
• D) $20

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Definitions:

EZ Ice Cream Inc.

Presumably a fictional company; without more context, it would represent a hypothetical business entity.

Condition Precedent

A condition in a contract that must be met before a party’s promise becomes absolute.

Condition Subsequent

A condition in a contract that operates to terminate a party’s absolute promise to perform.

Express Condition

A clearly stated, specific requirement within a contract that must be met for the contract to be fulfilled or an obligation to become due.