The Propeller Division Provides Propellers for the Plane Division of a Company

question 98

Multiple Choice

The Propeller Division provides propellers for the Plane Division of a company. The standard unit costs for the Propeller Division are as follows: $\begin{array}{lr}\text { Direct materials } & \$ 890 \\\text { Direct labor } & 1,590 \\\text { Variable overhead } & 575 \\\text { Fixed overhead } & 385 \\\text { Market price per unit } & 4,395\end{array}$
The propeller department has excess capacity. What is the best transfer price to avoid transfer price problems?

• A)$2,865
• B)$1,340
• C)$3,055
• D)$955

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Definitions:

Right-to-Work Laws

Legislation that guarantees workers the right to work for any employer without the requirement to join a union or pay union dues.

Union Shops

Workplaces where employment is conditional on maintaining membership in a labor union, typically after a probationary period.

Open Shops

Workplaces where joining a union is not a condition for employment, allowing for both union and non-union employees.

Pure Monopsony Power

A market condition where there is only one buyer for a product or service, giving that buyer significant control over prices.