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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