Plish Company Manufactures Only One Type of Washing Machine and Has

question 28

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 $60.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 8000-13,000 units. The fixed costs for the Fabrication Division are assumed to be $11.50 per unit at 13,000 units.

What is the transfer price per compressor from the Compressor Division to the Fabrication Division if the transfer price per compressor is 110% of full costs?

• A) $19.80
• B) $32.45
• C) $47.30
• D) $54.45

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Definitions:

Preventive Maintenance

Preventive maintenance involves regularly scheduled inspections, service, and repairs of equipment and facilities to prevent unexpected breakdowns and extend their useful life.

Value-Added

The enhancement added to a product or service by a company before offering it to customers, representing the difference between the cost of inputs and the value of outputs.

Lean Principles

A management philosophy focused on minimizing waste within manufacturing systems while simultaneously maximizing productivity.

Service Businesses

Companies that provide intangible products or services, such as consulting, repair, or maintenance.