Plank,IncHas a Division That Makes Paint and Another Division That

question 24

Essay

Plank,Inc.has a division that makes paint and another division that constructs subdivisions.The paint division incurs the following costs for one litre of paint:
The Paint Division can make 1,000,000 L per year,and expects to produce 1,000,000 L next year.The Construction Division currently buys 200,000 L of paint from an outside supplier for $5.20 per litre (the same price that the Paint Division receives).
$\begin{array}{lr}\text { Direct materials } & \$ 1.10 \\\text { Direct labour } & 1.45 \\\text { Variable overhead } & 0.90 \\\text { Fixed overhead } & 1.15 \\\text { Total } & \$ 4.60\end{array}$ A. The maximum transfer price per litre of paint is $\$$ _____.
B. The minimum transfer price per litre of $p$ aint is $\$$ _____.
C. Does it matter whether or not the two divisions transfer?

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Definitions:

Projection

A defense mechanism where one attributes their own unacceptable thoughts or feelings to someone else.

Aggressive Impulses

Innate or developed urges to act or react in a forceful or hostile manner towards others or oneself.

Growth-Inhibiting Environment

A setting or condition that restricts or hinders the development and progress of an organism or process.

Unconditional Positive Regard

Accepting and supporting someone regardless of what they say or do, as proposed by Carl Rogers in his client-centered therapy.