Answer the Following Questions Using the Information Below

question 64

Multiple Choice

Answer the following questions using the information below:
Calculate the Division operating income for the AlphaShoe Company which manufactures only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Sole Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $40. (Ignore changes in inventory.) The fixed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Assembly Division are assumed to be $14 per pair at 100,000 units.

-What is the transfer price per pair of soles from the Sole Division to the Assembly Division if the method used to place a value on each pair of soles is 180% of variable costs?

• A)$28.80
• B)$25.20
• C)$32.40
• D)$57.60

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Definitions:

Sweatshop Labor

Work done in very poor conditions for low pay, often in factories that make fast fashion, electronics, and other consumer goods.

Pauper Labor Fallacy

The incorrect belief that importing goods from countries with lower wage levels harms the economy of the importing country.

Opportunity Cost

Giving up the chance for gain from multiple possibilities by choosing a specific alternative.

Wheat

A type of cereal grain that is grown worldwide and is a staple food in many regions, used to make products like bread, pasta, and flour.