Plish Company Manufactures Only One Type of Washing Machine and Has

question 130

Multiple Choice

Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $56.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 11,000-16,000 units. The fixed costs for the Fabrication Division are assumed to be $8.50 per unit at 16,000 units.

What is the transfer price per compressor from the Compressor Division to the Fabrication Division if the method used to place a value on each compressor is 115% of variable costs?

• A) $28.50
• B) $41.98
• C) $43.00
• D) $46.50

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Definitions:

Creative Pursuits

Activities involving the use of imagination or original ideas to create something, often in the arts or literature.

Retirement Savings

Financial resources accumulated over one's working life, intended to support them financially during retirement.

25%

A fraction or percentage representing one quarter of a total amount or group.

Personalities

Refers to the individual differences in characteristic patterns of thinking, feeling, and behaving.