Answer the Following Question(s) Using the Information Below

question 112

Multiple Choice

Answer the following question(s) using the information below.
Beta Shoe Ltd. 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 $20. (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 $7 per pair at 100,000 units.
Sole's costs per pair of soles are:
Assembly's costs per completed pair of shoes are:

-What is the transfer price per pair of shoes from the Sole Division to the Assembly Division per pair of soles if the transfer price per pair of soles is 125% of full costs?

• A) $10.00
• B) $12.50
• C) $11.25
• D) $20.00
• E) $8.75

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Definitions:

Social Exchange Theory

A theoretical perspective that explains social behavior in terms of an exchange process, aiming to maximize benefits and minimize costs in relationships.

Economic Model

An abstract representation of economic processes, relationships, and theories used to predict or understand economic behaviors and outcomes.

Sternberg

Sternberg is often associated with his theory of intelligence, which suggests that human intelligence comprises analytical, creative, and practical components.

Emotional Support

Refers to the help and comfort gained from others, demonstrating care and concern for an individual's emotional and mental well-being.