Martin Company Currently Manufactures All Component Parts Used in the Manufacture

question 44

Multiple Choice

Martin Company currently manufactures all component parts used in the manufacture of various hand tools.The Extruding Division produces a steel handle used in three different tools.The budget for these handles is 120,000 units with the following unit cost. $$\begin{array} { | l | r | } \hline \text { Direct material } & \$ .60 \\\hline \text { Direct labor } & .40 \\\hline \text { Variable overhead } & .10 \\\hline \text { Fixed overhead } & \underline{.20} \\\hline \text { Total unit cost } & \$ 1.30 \\\hline\end{array}$$ Polishing Division purchases 20,000 handles from the Extruding Division and completes the hand tools.An outside supplier,Venture Steel,has offered to supply 20,000 units of the handle to Polishing Division for $1.25 per unit.The Extruding Division currently has idle capacity that cannot be used.If Martin would like to develop a range of transfer prices,what would be the minimum transfer price that Extruding would be willing to accept?

• A) $1.00.
• B) $1.10.
• C) $1.25.
• D) $1.30.

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Definitions:

Arousal

A state of heightened physiological activity, typically with an emphasis on alertness and readiness to respond.

EEG

Electroencephalogram, a test that detects electrical activity in your brain using small, flat metal discs attached to your scalp.

Brain Activity

The electrical and chemical processes occurring within the brain that are associated with various mental functions and behaviors.

Left Hemisphere

The left hemisphere of the brain is primarily involved in controlling the right side of the body and is often associated with analytical tasks, such as language processing, mathematics, and logic.