Division Delta of Golvin Corporation Makes and Sells a Single

question 101

Multiple Choice

Division Delta of Golvin Corporation makes and sells a single product which is used by manufacturers of fork lift trucks.Presently it sells 9,000 units per year to outside customers at $57 per unit.The annual capacity is 10,000 units and the variable cost to make each unit is $32.Division Echo of Golvin Corporation would like to buy 2,000 units a year from Division Delta 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 Delta?

• A) $57.00 per unit
• B) $19.50 per unit
• C) $34.50 per unit
• D) $32.00 per unit

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Definitions:

Cash Distribution

The process of paying out earnings, assets, or capital to the relevant stakeholders, such as dividends to shareholders.

Capital Accounts

Capital accounts represent the owners' or shareholders' equity in a company, reflecting the initial and additional investments minus withdrawals and losses.

Income Sharing

An agreement to distribute earnings or profits among participants, often seen in partnership arrangements or cooperative businesses.

Gains and Losses

Financial terms referring to the money made or lost on the sale of assets, separate from the ordinary operations of the business.