Use the Following Information to Answer Questions
Division a Produces

question 24

Multiple Choice

Use the following information to answer questions
Division A produces a product that it sells to the outside market.It has compiled the following:
$$\begin{array} { l l } \text { Variable manufacturing cost per unit } & \$ 10 \\\text { Variable selling costs per unit } & \$ 3 \\\text { Total fixed manufacturing costs } & \$ 150,000 \\\text { Total fixed selling costs } & \$ 30,000 \\\text { Per unit selling price to outside buyers } & \$ 40 \\\text { Capacity in units per year } & 30,000\end{array}$$
-Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 26,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.What would be the minimum transfer price per unit that Division A would be willing to accept?

• A)$10.00
• B)$14.60
• C)$16.00
• D)$40.00

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Definitions:

Allowance Factor

A multiplier or factor used to adjust estimated times or costs to account for specific conditions or inefficiencies in operations and processes.

Standard Time

A benchmark or established duration within which a specific task, job, or process should be completed.

Normal Time

The adjusted time value after accounting for various factors like work pace and efficiencies, representing the expected time a task should take under typical conditions.

Job Identity

The sense of self derived from the nature of one’s occupation or work role.