Chute Company's Extract Division Has Collected the Following Information:
Normal $~~~~~~~~$

question 111

Multiple Choice

Chute Company's Extract division has collected the following information:
Normal selling price $~~~~~~~~$$~~~~~~~~$$~~~~~~~~~~$$~~~~~~~~$ $2.90 per bottle
Variable product costs $~~~~~~~~$$~~~~~~~~$$~~~~~~~~~$$~~~~~~~~$ 1.25 per bottle
Fixed product costs . $~~~~~~~~$$~~~~ ~~$$~~~~~~~~$$~~~~~~~~$$~~ ~~~~$ 50 per bottle
Variable selling and administrative costs . $~~~~~~~~$ 25 per bottle
Production capacity $~~~~~~~~$$~~~~ ~~$$~~~~~~~~$$~~ ~~~~~$$~~~~~~~~$ 1,500,000 bottles
Assuming that the division has excess capacity of 300,000 and the Baked Goods division wants to buy 250,000 bottles,the minimum transfer price would be

• A) $2.90
• B) $2.00
• C) $1.50
• D) $1.15

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Definitions:

Production Department

A specific division within a manufacturing company responsible for the actual production of goods.

Manufacturing Facility

A physical location equipped for the production of goods, often involving machinery and labor.

Units Produced

The total quantity of items manufactured by a company within a specific period, indicating production volume.

Distorted Product Cost

Occurs when the assigned costs of a product do not accurately reflect the actual resources consumed by the product.