Use the Following Information for Questions

question 98

Multiple Choice

Use the following information for questions
Tuttle Motorcycles Inc. manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 20,000 units to the Production Division at $1,050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $2,550 and unit variable costs and fixed costs of $1,050 and $750, respectively. The Production Division is currently paying $2,400 per unit to an outside supplier. $90 per unit can be saved on internal sales from reduced selling expenses.
-What is the minimum transfer price that the Engine Division should accept?

• A) $2,460
• B) $2,550
• C) $2,400
• D) $1,500

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Definitions:

Instruments

Legal documents or tools that facilitate administrative, commercial, financial, or legal processes.

Consumer Goods

Items produced for personal, family, or household use, typically excluding services.

Equipment

Equipment encompasses the set of tools, machinery, and other hardware required for the execution of specific tasks or activities within various fields and industries.

Fixture

A piece of property that was originally moveable but has become attached to real property in such a way that it is legally considered part of the real property.