Wrightsville Beach Company Produces Ice Packs and Various Sizes of Cooler

question 86

Multiple Choice

Wrightsville Beach Company produces ice packs and various sizes of cooler bags. The Lunch Box division would like to buy 125,000 units from the Ice Pack division, which currently has excess capacity of 250,000 units. The ice packs are normally sold for $1.65. The Ice Pack division’s variable cost per pack is $.95 and fixed cost per pack are $.30. The ice packs could be purchased from another company for $1.75. Both the Ice Pack and the Lunch Box divisions are operated as profit centers. If Wrightsville Beach Company choses to use a cost-plus-based transfer price based on variable cost for the ice packs, what transfer price would the company use assuming a 20% markup?

• A) $1.14
• B) $1.25
• C) $1.65
• D) $1.75

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Definitions:

Throat

The anterior part of the neck, which consists of the pharynx and larynx, serving as the pathway for air to the lungs and food to the esophagus.

Hemoglobin

A protein in red blood cells responsible for transporting oxygen from the lungs to the rest of the body.

Oxygen

A chemical element with symbol O, essential for most life forms on earth, involved in respiration and energy production in cells.