The Vega Division of Ace Company Makes Wheels That Can $\$ 42$

question 145

Multiple Choice

The Vega Division of Ace Company makes wheels that can either be sold to outside customers or transferred to the Walsh Division of Ace Company. Last month, the Walsh Division bought all 4,000 of its wheels from the Vega Division for $\$ 42$ each. The following data are available from last month's operations for the Vega Division:
$\begin{array}{|l|r|}\hline \text { Capacity } & 12,000 \text { wheels } \\\hline \text { Selling Price per Wheel to Outside Customers } & \$ 45 \\\hline \text { Variable Costs per Wheel Sold to Outside Customers } & \$ 30 \\\hline\end{array}$
If the Vega Division sells wheels to the Walsh Division, Vega can avoid \$2 per wheel in sales commissions. An outside supplier has offered to supply wheels to the Walsh Division for $\$ 41$ each.
-) What is the maximum price per wheel that Walsh should be willing to pay Vega?

• A) $28.
• B) $41.
• C) $42.
• D) $45.

---

Definitions:

Liabilities

Financial obligations or debts that a company or individual owes, which are recorded on the right side of the balance sheet.

Mortgages

A type of loan specifically used for the purchase of real estate, where the property itself serves as collateral against the borrowed funds.

Consumer Credit

A form of credit extended to consumers to finance the purchase of goods or services, often associated with personal loans, credit cards, and lines of credit.

Productive Capacity

The maximum output a business, industry, or economy can produce using all available resources efficiently.