Rags-To-Riches Corporation Has Two Divisions, X and Y What Is the Transfer Price for Division X Based on Sells

question 32

Multiple Choice

Rags-to-Riches Corporation has two divisions, X and Y. Division X sells its product to Division Y. Standard costs for Division X are as follows: $\begin{array}{lr}\text { Direct materials } & \$ 4 \text { per unit } \\\text { Direct labor } & 2 \text { per unit } \\\text { Variable overhead } & 5 \text { per unit } \\\text { Fixed overhead } & 3 \text { per unit } \\\text { Total } & \$ 14 \text { per unit }\end{array}$ What is the transfer price for Division X based on standard variable cost plus a markup of 25 percent?

• A)$11.00
• B)$17.50
• C)$13.75
• D)$7.50

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Definitions:

Operating Cost

Expenses associated with the day-to-day functions of a business, including costs for rent, utilities, and payroll.

Useful Life

The estimated period over which an asset is expected to be usable for its intended purpose, affecting depreciation calculations.

Economic Value

A measure of the benefit provided by a good or service to an economic agent, often quantified in terms of willingness to pay or the added utility it offers.

Operating Cost

Expenses related to the day-to-day functioning of a business, such as rent, utilities, salaries, and equipment maintenance.