(Appendix 11A) Oberley Products, Inc

question 66

Multiple Choice

(Appendix 11A) Oberley Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver that could be used by another division in the company, the Industrial Products Division, in one of its products. Data concerning that receiver appear below:
The Industrial Products Division is currently purchasing 5,000 of these receivers per year from an overseas supplier at a cost of $58 per receiver.
-Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $6 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?

• A) $61 per unit
• B) $46 per unit
• C) $67 per unit
• D) $58 per unit

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Definitions:

Functional

Pertains to the practical or utilitarian aspects of something, emphasizing its purpose or role rather than its aesthetics.

Produce

To create or manufacture goods or products, often on a large scale.

Centralized

A system or organizational structure where decision-making and control are concentrated in a single point or at a high level.

Decentralized

Pertains to the distribution of functions, powers, people, or things away from a central location or authority.