Answer the Following Questions Using the Information Below:
the Betashoe

question 122

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:
$\begin{array} { l l } \text { Direct materials } & \$ 6 \\ \text { Direct labour } & \$ 2 \\ \text { Variable overhead } & \$ 1 \\ \text { Division fixed costs } & \$ 7 \end{array}$
-If the method used to place a value on each pair of soles is 180% of variable costs,what is the transfer price per pair of soles from the Sole Division to the Assembly Division?

• A)$12.60
• B)$28.80
• C)$16.20
• D)$14.40

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Definitions:

Income Ratio

A financial metric used to gauge a company's profitability by comparing its income to other relevant figures, such as sales or assets.

Business Operations

The day-to-day activities involved in running a business, which include producing goods, providing services, and selling to customers.

Quality

The standard of something as measured against other similar things, or the degree of excellence of something.

Income Ratio

A financial metric measuring the efficiency or profitability of an organization, often represented as a comparison between income and some other relevant factor like sales or assets.