Figure 20-2 Klaehn Industries Is a Decentralized Company That Evaluates Its Divisions

question 12

Multiple Choice

Figure 20-2
Klaehn Industries is a decentralized company that evaluates its divisions based on ROI. The Fahl Division has the capacity to make 1,000 units of a component. The Fahl Division's variable costs are £40 per unit.
The Melton Division can use the component in one of its products. The Melton Division would incur £50 of variable costs to convert the component into its own product that sells for £160.
-Refer to Figure 20-2. Assume the Fahl Division can sell all that it produces for £100 each. The Melton Division needs 100 units. What is the correct transfer price?

• A)£120
• B)£110
• C)£100
• D)£60

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Definitions:

Craftsmen

Skilled workers who create products using their hands, often employing traditional techniques in various trades such as carpentry, metalwork, or weaving.

Shopkeepers

Individuals who own or operate retail businesses, selling goods to the public in shops or similar establishments.

Catholic Church

A major worldwide Christian church led by the Pope, based in Vatican City.

Irish-Catholic Immigrants

Immigrants from Ireland, often Catholic, who moved to other countries for better opportunities or to escape hardships.