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

question 60

Multiple Choice

Use the information below to answer the following question(s) .The Burnaby Division of Columbia Ltd.produces and sells component parts.Its variable costs per unit are $80 for direct materials, $32 for direct labour and $18 for variable factory overhead.It currently can sell it components on the outside market at a price of $165/unit.Fixed overhead costs are $22 per unit based on a denominator volume of 180,000 units.
-The Surrey Division of Columbia Ltd.has approached the Burnaby Division and requested that it supply 25,000 units of the component at a transfer price of $150.The Burnaby Division will save $3 per unit of direct materials costs for the components manufactured for the Surrey Division.Assuming Burnaby Division has no idle capacity, what is the minimum transfer price the Burnaby Division should agree to accept?

• A)$165
• B)$150
• C)$162
• D)$130
• E)$127

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Definitions:

Significance Level

A threshold used in statistical hypothesis testing to determine whether a result is statistically significant, typically denoted by alpha (α), and representing the probability of rejecting the null hypothesis when it is in fact true.

Variances

A measure of the dispersion representing the average of the squared differences from the Mean, showing how far each value in the set is from the mean.

Small Grocery Stores

Retail establishments primarily engaged in offering a range of food items and basic household goods, usually smaller in size and scope compared to supermarket chains.

Significance Level

The threshold below which a p-value is considered statistically significant, indicating the probability of rejecting the null hypothesis when it is true.