Figure 12-3Grey Inc Centra Has Capacity to Make 700,000 Boxes Per Year

question 10

Multiple Choice

Figure 12-3Grey Inc. has many divisions that are evaluated on the basis of ROI. One division, Centra, makes boxes. A second division, Mantra, makes chocolates and needs 80,000 boxes per year. Centra incurs the following costs for one box:
$\begin{array}{ll}\text { Direct materials } & \$ 0.35 \\\text { Direct labor } & \$ 0.60 \\\text { Variable overhead } & \$ 0.40 \\\text { Fixed overhead } & \$ 0.13 \\\text { Total } & \$ 1.48\end{array}$ Centra has capacity to make 700,000 boxes per year. Mantra currently buys its boxes from an outside supplier for $1.80 each (the same price that Centra receives) .
-Refer to Figure 12-3. Assume that Grey Inc. allows division managers to negotiate transfer price. Centra is producing 600,000 boxes. If Centra and Mantra agree to transfer boxes, what is the ceiling of the bargaining range and which division sets it?

• A) $1.48; Centra
• B) $1.35; Centra
• C) $1.80; Mantra
• D) $1.35; Mantra
• E) $1.80; Centra

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Definitions:

Acetyl-CoA

is an important molecule that plays a central role in metabolism, acting as a substrate for the citric acid cycle and fatty acid synthesis.

Carbohydrates

Organic compounds consisting of carbon, hydrogen, and oxygen, serving as a major energy source for the body and include sugars, starches, and fibers.

Structural Components

Basic building blocks or elements that make up a physical structure or system.

Amino Acids

Amino acids are organic compounds that combine to form proteins, serving as the building blocks of life with essential roles in body tissue structure, function, and regulation.