Corrugated, Inc The Box Division Has Capacity to Make 500,000 Boxes Per

question 118

Multiple Choice

Corrugated, Inc.Corrugated, Inc. has many divisions that are evaluated on the basis of ROI. One division, the Box Division, makes boxes. The Candy Division makes candy and needs 50,000 boxes per year. The Box Division incurs the following costs for one box: $$\begin{array} { l c } \text { Direct materials } & \$ 0.20 \\\text { Direct labour } & 0.70 \\\text { Variable overhead } & 0.10 \\\text { Fixed overhead } & \underline { 0.23 } \\\text { Total } & \underline { \$ 1.23 }\end{array}$$ The Box Division has capacity to make 500,000 boxes per year. The Candy Division currently buys its boxes from an outside supplier for $1.40 each (the same price that the Box Division receives) .
-Refer to Corrugated, Inc. Assume the company mandates that any transfers take place at full manufacturing cost. What would be the transfer price if the Box Division transferred boxes to the Candy Division?

• A) $0.90
• B) $1.00
• C) $1.23
• D) $1.40

---

Definitions:

Doctor Visit

An appointment or instance in which an individual consults with a physician or medical professional for health assessment, advice, or treatment.

Rent Controls

Government regulations that limit the amount landlords can charge for renting out a property, intending to make housing more affordable for tenants.

Imposed

Something that is enforced or applied by authority.

Government

The system or group of people governing an organized community, often a state, and the institutions through which policies are set and affairs of state are conducted.