Raphael,Inc

question 122

Multiple Choice

Raphael,Inc.has a division that manufactures a component that sells for $170 and has a variable cost of $50.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $24.What is the minimum transfer price if the division is operating below its capacity?

• A) $170
• B) $50
• C) $74
• D) $24

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Definitions:

Finished Goods

Refers to products that have completed the manufacturing process but have not yet been sold or distributed to end customers.

Cost

The value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore.

Finished Goods Inventory

The stock of completed products available for sale at the end of an accounting period.

Manufacturing Company

A business entity that engages in the production of goods using labor, machines, tools, and chemical or biological processing.