Giga-Stuff, Inc -Refer to the Figure

question 15

Multiple Choice

Giga-Stuff, Inc. has a number of divisions. One division, Sophistosand, makes component X, which is used in the manufacture of DVD players. Another division, Videostuff, makes DVD players and needs 60,000 units of component X per year. Sophistosand incurs the following costs for one unit of component X:
Sophistosand has the capacity to make 400,000 units of component X per year but, due to a soft market, plans to produce and sell only 320,000 units next year. Videostuff currently buys component X from an outside supplier for $2.50 each (the same price that Sophistosand receives) .
$$\begin{array} { l r } \text { Direct materials } & \$ 0.30 \\\text { Direct labour } & 0.15 \\\text { Variable overhead } & 0.70 \\\text { Fixed overhead } & 1.00 \\\text { Total } & \$ 2.15\end{array}$$
-Refer to the Figure.Assume that Sophistosand and Videostuff have agreed on a transfer price of $2.20.What is the total benefit for Sophistosand?

• A)$18,000
• B)$63,000
• C)$69,000
• D)$81,000

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Definitions:

Dynamic Pricing

A pricing strategy where prices are adjusted in real-time based on supply and demand, market conditions, and customer behavior.

Online Shopping

is the process of purchasing goods or services over the internet through various websites and online marketplaces.

Shipping and Handling

The process and associated fees of preparing and dispatching a product to the customer, including both the physical transportation and the handling of goods.