Use the Information Below to Answer the Following Question(s)

question 172

Multiple Choice

Use the information below to answer the following question(s) .Soft Cushion Company is highly decentralized.Each division is empowered to make its own sales decisions.The Assembly Division can purchase cushion stuffing from the Production Division or from external suppliers.The Production Division has been the major supplier of stuffing in recent years.The Assembly Division has announced that two external suppliers will be used to purchase the stuffing at $20 per kilogram for the next year.The Production Division recently increased its unit price to $40.The manager of the Production Division presented the following information; variable cost $32, fixed cost $8, to top management in order to attempt to force the Assembly Division to purchase the stuffing internally.The Assembly Division purchases 20,000 kg per month.
-The general guideline for determining the minimum transfer price is

• A)cover all employee costs incurred in production.
• B)fixed cost plus opportunity costs per unit to the vendor division.
• C)variable cost plus opportunity costs per unit to the vendor division.
• D)fixed cost plus incremental costs per unit up to the point of transfer.
• E)additional incremental costs per unit up to the point of transfer, plus opportunity costs per unit to the vendor division.

---

Definitions:

Return on Equity

ROE (Return on Equity) indicates a company's profit efficiency by showing the amount of profit made from shareholders' investments.

Current Ratio

A financial metric that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Current Liabilities

Financial duties that must be paid off within a year or the standard operational cycle.

Accounts Receivable Turnover

A financial metric indicating how many times a company's receivables are converted to cash in a given period.