Steven Company's Records Reveal the Following The Variable Costs of Division B Will Be Incurred Whether

question 55

Multiple Choice

Steven Company's records reveal the following: $\begin{array}{lr}\text { Division A }\\\text { Market price of finished part to outsiders } & \$ 75 \\\text { Variable costs per part } & \underline{51} \\\text { Contribution margin per part } & \underline{\$ 24} \\\text { Total contribution for } 10,000 \text { parts } & \$ 240,000\end{array}$

$\begin{array}{ll}\text { Division B }\\\text {Sales price of finished product Variable costs: }&&&\$105\\\text {Division A 1 part @ \$51) }&\\\text {Division B }&&\$51\\\text {Processing }&\$27\\\text {Selling }&12&39&-90\\\text {Contribution margin per unit }&&&\$15\\\text { Total contribution for } 10,000 \text { units }&&&\$150,000\end{array}$
The variable costs of Division B will be incurred whether it buys from Division A or from an outside supplier.If Division A wants to transfer the parts to Division B for $81, the manager of Division B would _____.

• A)not want to buy from Division A, as the same product could be purchased at the market price of $75
• B)buy from Division A, as this would be in the best interest of the company as a whole
• C)buy the part from Division A as long as Division A could supply a large enough quantity to make it profitable to Division B
• D)probably ask Division A's manager to split the difference between the $81 and the market price of $75 to arrive at a transfer price of $78

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Definitions:

Triple Bottom Line

An accounting framework that considers social, environmental, and financial performance as measures of an organization’s success.

Corporate Philanthropy

The act of a corporation donating resources, including money, goods, or time, to social causes or charitable organizations.

Audience Attention

Audience Attention refers to the degree of focus, interest, or engagement that an audience gives to a message or content.

Production Costs

The total expenses incurred in the manufacturing or production of goods, including materials, labor, and overhead.