Use the Following Information for Questions

question 87

Multiple Choice

Use the following information for questions
The Wood Division of Fir Products, Inc. manufactures rubber moldings and sells them externally for $55. Its variable cost is $25 per unit, and its fixed cost per unit is $7. Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $32.
-Assuming the Wood Division does not have any available capacity, the minimum transfer price it should accept is

• A) $7.
• B) $25.
• C) $32.
• D) $55.

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Definitions:

Standard Costs

Pre-determined or estimated costs to perform an operation, produce a product, or offer a service, used as a basis for pricing and budgetary control.

Work In Process Inventory

Items that are partially completed in a manufacturing process but are not yet finished goods.

Standard Control Account

An account used to monitor variances between actual costs and standard (expected) costs within an accounting period.

Sales Volume Variance

A measure used to assess the impact of the difference between actual sales volume and budgeted sales volume on revenue.