The Machine Division Provides Engines for the ATV Division of a Company.The

question 67

Multiple Choice

The Machine Division provides engines for the ATV Division of a company.The standard unit costs for Machine Division are as follows: The engine department has excess capacity.What is the best transfer price to avoid transfer price problems?
$$\begin{array} { l r } \text { Direct materials } & \$ 500 \\\text { Direct labour } & 1,100 \\\text { Variable overhead } & 200 \\\text { Fixed overhead } & 100 \\\text { Market price per unit } & 3,000\end{array}$$

• A)$300
• B)$900
• C)$1,350
• D)$1,800

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Definitions:

Average Collection Period

calculates the average number of days it takes for a business to receive payments from its customers for invoices issued.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Debt-To-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.

Equity Multiplier

A financial leverage ratio that shows the proportion of a company's assets that are financed by shareholder's equity.