Division a of Tripper Company Produces a Part That It

question 81

Multiple Choice

Division A of Tripper Company produces a part that it sells to other companies. Sales and cost data for the part follow: Division B, another division of Tripper Company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, $1 in variable costs can be avoided.Assume that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into outside sales. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?

• A) $40 per unit
• B) $39 per unit
• C) $28 per unit
• D) $27 per unit

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Definitions:

Observational Learning

Acquiring knowledge by watching the actions of others and the results of those actions.

Reinforcement

In behavioral psychology, a process in which a behavior is encouraged or strengthened by a consequence that follows it.

Behavior

The way in which one acts or conducts oneself, especially towards others, shaped by learning, perception, and external stimuli.

Encoding

The process of converting information into a form that can be stored in memory.