(Appendix 12A)Division X Makes a Part That It Sells to Customers

question 8

Multiple Choice

(Appendix 12A) Division X makes a part that it sells to customers outside of the company.Data concerning this part appear below: Division Y of the same company would like to use the part manufactured by Division X in one of its products.Division Y currently purchases a similar part made by an outside company for $70 per unit and would substitute the part made by Division X.Division Y requires 5, 000 units of the part each period.Division X can already sell all of the units it can produce on the outside market.What should be the lowest acceptable transfer price from the perspective of Division X?

• A)$75
• B)$66
• C)$16
• D)$50

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Definitions:

Condensation Point

The temperature at which a gas becomes a liquid; the cooling point where gaseous substances convert into their liquid state.

Alkanes

Hydrocarbons containing only single bonds between carbon atoms, with the general formula CnH2n+2.

Solvents

Substances that dissolve a solute, resulting in a solution; typically liquids but can also be solid or gas.

Non-Reactive

A term describing substances that do not easily undergo chemical reactions or bond with other substances.