Figure 3 the Adam Division Produces a Component That Is Used by Used

question 39

Multiple Choice

Figure 3
The Adam Division produces a component that is used by the West Division. The cost of manufacturing the component is as follows:
^aBased on a practical volume of 250,000 components
Other costs incurred by the Adam Division are as follows:
The component usually sells for £90 in the external market. The Adam Division is capable of producing 250,000 components per year; however, only 200,000 components are expected to be sold next year. The variable selling expenses are avoidable if the component is sold internally.
The West Division has been buying the same component from an external supplier for £80 each. The West Division expects to use 40,000 units of the component next year. The manager of the West Division has offered to buy 40,000 units from the Adam Division for £56 each.
-Refer to Figure 3. The minimum transfer price that the Adam Division would accept is

• A) £60
• B) £50
• C) £48
• D) £30

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Definitions:

Registered Phrases

Registered Phrases are phrases that have been legally registered for protection, often in the context of trademarks to identify the services or goods of a particular source.

Distribution Function

The process of transporting, storing, and delivering products from the manufacturer to the consumer in an efficient manner.

Warehouse to Retailers

The process of moving products from storage facilities to retail stores for sale to consumers.

Timely Fashion

Refers to completing tasks or responding within a reasonable or expected timeframe.