(Appendix 11A) Ebbs Products, Inc

question 71

Multiple Choice

(Appendix 11A) Ebbs Products, Inc., has a Motor Division that manufactures and sells a number of products, including a standard motor. Data concerning that motor appear below:
The Automotive Division of Ebbs Products, Inc needs 9,000 special heavy-duty motors per year. The Motor Division's variable cost to manufacture and ship this special motor would be $46 per unit. Because these special motors would requires more manufacturing resources than the standard motor, the Motor Division would have to reduce its production and sales of standard motors to outside customers from 86,000 units per year to 72,500 units per year.
-From the standpoint of the Motor Division,what is the minimal acceptable transfer price for the special motors for the Automotive Division?

• A) $84.00 per unit
• B) $103.00 per unit
• C) $81.00 per unit
• D) $64.00 per unit

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Definitions:

American Standard

Often refers to a set of guidelines or specifications used in the United States for various products, practices, or measurements to ensure quality, safety, and efficiency.

New Immigrants

Wave of newcomers from southern and eastern Europe, including many Jews, who became a majority among immigrants to America after 1890.

Close-Knit Communities

Social groups characterized by strong bonds, frequent interactions, and a high degree of solidarity among members.

Scientific Management

Management campaign to improve worker efficiency using measurements like “time and motion” studies to achieve greater productivity; introduced by Frederick Winslow Taylor in 1911.