Figure 12-3Grey Inc Centra Has Capacity to Make 700,000 Boxes Per Year

question 87

Multiple Choice

Figure 12-3Grey Inc. has many divisions that are evaluated on the basis of ROI. One division, Centra, makes boxes. A second division, Mantra, makes chocolates and needs 80,000 boxes per year. Centra incurs the following costs for one box:
$\begin{array}{ll}\text { Direct materials } & \$ 0.35 \\\text { Direct labor } & \$ 0.60 \\\text { Variable overhead } & \$ 0.40 \\\text { Fixed overhead } & \$ 0.13 \\\text { Total } & \$ 1.48\end{array}$ Centra has capacity to make 700,000 boxes per year. Mantra currently buys its boxes from an outside supplier for $1.80 each (the same price that Centra receives) .
-Refer to Figure 12-3. Assume that Grey Inc. allows division managers to negotiate transfer price. Centra is producing 700,000 boxes. If Centra and Mantra agree to transfer boxes, what is the floor of the bargaining range and which division sets it?

• A) $1.80; Centra
• B) $1.35; Centra
• C) $1.48; Mantra
• D) $1.35; Mantra
• E) $1.80; Mantra

Recognize the influence of physiological and situational cues on the differentiation and labeling of emotions.

Discuss the interplay between biological and environmental factors in governing behavior.

Identify the role of culture in shaping emotional experience and expression.

Distinguish between subjective well-being and other components of emotion.

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Definitions:

Overhead Assigned

The allocation of indirect costs to specific products or cost objects.

Traditional Costing

A costing methodology that allocates manufacturing overhead costs to products based on a predetermined rate, often volume-based such as labor hours or machine hours.

Direct Labor-Hours

An evaluation of the cumulative hours spent directly in the manufacturing of products.

Total Overhead Applied

The sum of all overhead costs that have been allocated to products or services based on a predetermined overhead rate.