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

question 154

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. mandates that any transfers take place at full manufacturing cost. What would be the transfer price if Centra transferred boxes to Mantra?

• A) $1.35
• B) $1.48
• C) $1.00
• D) Cannot be determined from the information given.
• E) $0.90

---

Definitions:

Doubt

A feeling of uncertainty or lack of conviction.

Will

The mental faculty by which an individual decides or chooses between different courses of action.

Existential Import

The implication that a statement has concerning the existence of the subjects it mentions.

Categorical Syllogism

A categorical syllogism is a type of deductive argument consisting of three categorical propositions that involve a set of three terms, leading to a conclusion based on logical relationships.