Answer the Following Questions Using the Information Below:
Plish Company

question 110

Multiple Choice

Answer the following questions using the information below:
Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $40.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 10,000 units.
Compressor's costs per compressor are:
$\begin{array} { l r } \text { Direct materials } & \$ 15.00 \\ \text { Direct labor } & \$ 7.25 \\ \text { Variable overhead } & \$ 3.00 \\ \text { Division fixed costs } & \$ 7.50 \end{array}$
Fabrication's costs per completed air conditioner are:
$\begin{array} { l r } \text { Direct materials } & \$ 150.00 \\ \text { Direct labor } & \$ 62.50 \\ \text { Variable overhead } & \$ 20.00 \\ \text { Division fixed costs } & \$ 7.50 \end{array}$
-What is the transfer price per compressor from the Compressor Division to the Fabrication Division if the method used to place a value on each compressor is 150% of variable costs?

• A) $22.50
• B) $37.88
• C) $45.00
• D) $50.50

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Definitions:

Administrative Department

A division within a company responsible for overseeing and providing essential support services such as finance, HR, and clerical work.

Employee Hours

The total number of hours worked by all employees within a specific period, often used for productivity analysis and labor costing.

Direct Method

In cost accounting, a technique that allocates service department costs directly to producing departments without considering any services rendered between service departments.

Administrative Costs

All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling.