Division X of Charter Corporation Makes and Sells a Single

question 55

Multiple Choice

Division X of Charter Corporation makes and sells a single product that is used by manufacturers of forklift trucks.Presently,it sells 12,000 units per year to outside customers at $24 per unit.The annual capacity is 20,000 units,and the variable cost to make each unit is $16.Division Y of Charter Corporation would like to buy 10,000 units a year from Division X to use in its products.There would be no cost savings from transferring the units within the company rather than selling them on the outside market.What should be the lowest acceptable transfer price from the perspective of Division X?

• A) $16.00.
• B) $17.60.
• C) $21.40.
• D) $24.00.

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Definitions:

Medicare Tax Rate

The percentage of an employee's earnings that is withheld by the employer to contribute to the U.S. Medicare program, which provides health insurance to eligible individuals.

Federal Unemployment Compensation Tax

A tax imposed on employers to fund the federal government's oversight of the state unemployment insurance programs.

Quick Ratio

A liquidity metric that evaluates a company's ability to pay its current liabilities without needing to sell inventory, calculated as (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities.

Current Liabilities

Obligations or debts that a company is expected to pay off within one year or within its normal operating cycle.