Wetherald Products, Incorporated, Has a Pump Division That Manufactures and Sells

question 40

Multiple Choice

Wetherald Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: The Pool Products Division is currently purchasing 4,000 of these pumps per year from an overseas supplier at a cost of $74 per pump.Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs. What should be the minimum acceptable transfer price for the pumps from the standpoint of the Pump Division?

• A) $74 per unit
• B) $53 per unit
• C) $64 per unit
• D) $82 per unit

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Definitions:

Recessions

Periods of temporary economic decline during which trade and industrial activity are reduced.

Gross Investment

The total amount spent on new capital assets, before accounting for depreciation, indicating the level of investment in an economy's productive capacity.

Net Investment

The total a company invests in new capital assets, minus the cost of depreciation.

Bondholders

Individuals or institutions that hold the debt securities issued by governments or corporations, entitled to receive interest payments and the principal on maturity.