Answer the Following Questions Using the Information Below:
Timekeeper Corporation

question 134

Multiple Choice

Answer the following questions using the information below:
Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high-end watches. Each division's costs are provided below:
$$\begin{array} { l c l } \text { Manufacturing: } & \text { Variable costs per unit } & \$ 1.00 \\& \text { Fixed costs per unit } & \$ 5.00 \\\text { Distribution: } & \text { Variable costs per unit } & \$ 0.60 \\& \text { Fiæed costs per unit } & \$ 0.40\end{array}$$ The Distribution Division has been operating at a capacity of 4,000,000 units a week and usually purchases 2,000,000 units from the Manufacturing Division and 2,000,000 units from other suppliers at $9.00 per unit.
-What is the transfer price per watch from the Manufacturing Division to the Distribution Division,assuming the method used to place a value on each transfer is 120% of full costs?

• A) $6.00
• B) $7.20
• C) $9.00
• D) $11.00

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Definitions:

Hormone

A chemical messenger produced by glands in the body, which regulates various bodily functions and processes.

Closeness

The quality of feeling familiar, intimate, or emotionally connected with someone or something.

Defensive Pessimism

Thinking negative thoughts to prepare for negative outcomes.

Pessimistic Explanatory Style

Seeing bad events as all-encompassing.