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

question 116

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:

Operating Revenues

Operating Revenues are the income earned from a company's core business operations, excluding non-operating income sources like investments.

Income Tax Expense

The amount of money a company owes in taxes based on its taxable income.

Income from Operations

The earnings generated from a company's regular business activities before taxes and interest, indicating the efficiency of core operational management.