Answer the Following Questions Using the Information Below:
the Betashoe

question 5

Multiple Choice

Answer the following questions using the information below:
The Betashoe Company manufactures shoes.It has two divisions: the Sole Division and the Assembly Division.The Sole Division manufactures soles for the Assembly Division,which completes the manufacturing of the shoes and sells the completed product to retailers.The Sole Division 'sells' pairs of 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 of shoes at 100 000 units.
Costs per pair of soles are:
$\begin{array}{ll}\text { Direct materials } & \$ 4 \\\text { Direct labour } & \$ 3 \\\text { Variable overhead } & \$ 2 \\\text { Division fixed costs } & \$ 1\end{array}$

Assembly's costs per completed pair of shoes are:
$\begin{array} { l l } \text { Direct materials } & \$ 6 \\ \text { Direct labour } & \$ 2 \\ \text { Variable overhead } & \$ 1 \\ \text { Division fixed costs } & \$ 7 \end{array}$
-What is the market-based transfer price per pair of soles from the Sole Division to the Assembly Division?

• A)$10
• B)$16
• C)$20
• D)$26

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Definitions:

Cohesiveness

The degree to which members of a group or team feel attracted to the group and motivated to remain a part of it.

Productivity

The efficiency at which individuals or systems produce goods or complete tasks.

Free Riding

A situation in which individual members of a group benefit from the efforts of others without contributing themselves.

Equity

A principle based on fairness, where individuals expect to receive rewards proportional to their contributions.