Branded Shoe Company Manufactures Only One Type of Shoe and Has

question 22

Multiple Choice

Branded Shoe Company manufactures only one type of shoe and has two divisions, the Stitching Division and the Polishing Division. The Stitching Division manufactures shoes for the Polishing Division, which completes the shoes and sells them to retailers. The Stitching Division "sells" shoes to the Polishing Division. The market price for the Polishing Division to purchase a pair of shoes is $52. (Ignore changes in inventory.) The fixed costs for the Stitching Division are assumed to be the same over the range of 40,000-103,000 units. The fixed costs for the Polishing Division are assumed to be $24 per pair at 103,000 units.

What is the transfer price per pair of shoes from the Stitching Division to the Polishing Division if the method used to place a value on each pair of shoes is 175% of variable costs?

• A) $36.75
• B) $66.50
• C) $94.50
• D) $7.00

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Definitions:

Hygiene Factors

According to Herzberg's motivation-hygiene theory, these are factors that can lead to dissatisfaction if absent but do not necessarily motivate if present; they include aspects like salary, company policies, and working conditions.

Herzberg's Two-Factor Theory

A motivational theory proposing that job satisfaction and dissatisfaction arise from two distinct sets of factors: hygiene factors and motivators.

Maslow's Need Hierarchy

A theory in psychology proposed by Abraham Maslow, which outlines a hierarchy of human needs from basic (physiological) to higher (self-actualization) needs.

Security

The condition of being protected from or not exposed to danger or risk; also refers to measures taken for safety.