Hydroxide Company Has Two Divisions, the Blending Division and Canning $\begin{array} { l } \text {Direct materials }& \text {\( \$ 3.00 \) per gallon }\\ \text {Direct labor }& \text {2.40 per gallon }\\\end{array}$

question 61

Multiple Choice

Hydroxide Company has two divisions, the Blending Division and Canning Division. The Blending Division sells chemicals to the Canning Division. Standard costs for the Blending Division are as follows: $\begin{array} { l } \text {Direct materials }& \text {\( \$ 3.00 \) per gallon }\\ \text {Direct labor }& \text {2.40 per gallon }\\\end{array}$

The Canning Division uses the following predetermined overhead rate: $\begin{array} { l } \text {variable overhead }& \text {\$ 3.60 per gallon}\\ \text {Fixed overhead }& \text {2.40 per gallon}\\ \text { Total }& \text {\$ 6.00 per gallon} \\\end{array}$

What is the transfer price for the chemicals per gallon based on standard variable cost?

• A)$3.00
• B)$9.00
• C)$5.40
• D)$11.40

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Definitions:

Other Expenses

Costs that are not directly associated with the production of goods or services, such as administrative and selling expenses.

Planning Budget

A budget created for a particular level of activity, it helps in setting goals and objectives for future financial plans.

Containers Refurbished

The process of cleaning, repairing, and restoring containers to a like-new condition for reuse or resale.

Employee Salaries And Wages

Compensation paid to employees for their labor or services, typically expressed as a periodic payment such as hourly, weekly, or monthly.