Royal Products, Incorporated, Has a Connector Division That Manufactures and Sells

question 63

Multiple Choice

Royal Products, Incorporated, has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: The Transmission Division is currently purchasing 6,000 of these connectors per year from an overseas supplier at a cost of $65 per connector.Assume that the Connector Division has enough idle capacity to handle all of the Transmission Division's needs. What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?

• A) $21 per unit
• B) $56 per unit
• C) $69 per unit
• D) $65 per unit

---

Definitions:

Australian Accounting Standards

Rules and guidelines set by the Australian Accounting Standards Board (AASB) that govern how financial reporting is conducted in Australia.

IASB

Stands for International Accounting Standards Board, responsible for developing International Financial Reporting Standards (IFRS).

Economic Benefits

The gains received or receivable by an entity as a result of past or future transactions or events.

Asset

A present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits.