Nanke Products,Inc

question 91

Multiple Choice

Nanke Products,Inc.,has a Sensor Division that manufactures and sells a number of products,including a standard sensor that could be used by another division in the company,the Safety Products Division,in one of its products.Data concerning that sensor appear below:
The Safety Products Division is currently purchasing 3,000 of these sensors per year from an overseas supplier at a cost of $59 per sensor.
Assume that the Sensor Division is selling all of the sensors it can produce to outside customers.What should be the minimum acceptable transfer price for the sensors from the standpoint of the Sensor Division?

• A) $37 per unit
• B) $59 per unit
• C) $20 per unit
• D) $64 per unit

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Definitions:

Debit Side

The left side of a ledger account that is used to record increases in assets, expenses, and decreases in liabilities, equity, and income.

Asset Accounts

Ledger accounts that record a company's owned resources with economic value expected to provide future benefits.

Compound Entry

An accounting entry that involves more than two accounts, where there are multiple debits, credits, or both.

Three Accounts

A fundamental concept in accounting that typically refers to the three major financial statements: the balance sheet, income statement, and cash flow statement.