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:

Inventory

Describes the goods and materials that a business holds for the ultimate goal of resale or production.

Overtime

Additional hours worked beyond the standard working hours, often resulting in higher pay rates.

Master Production Schedule

A plan for the production of individual items at specific times in the future.

Aggregate Plan

A medium-term plan that outlines the total production levels, inventory, and workforce size required to meet anticipated demand.