(Appendix 12A)Division 1 of Ace Company Makes and Sells Wheels

question 15

Multiple Choice

(Appendix 12A) Division 1 of Ace Company makes and sells wheels that can either be sold to outside customers or transferred to Division 2.The following data are available from last month: Division 1: Division 2: If Division 1 sells the wheels to Division 2, Division 1 can avoid $2 per unit in sales commissions.
Suppose that Division 1 sells 7, 500 units per month to outside customers.According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division if Division 2 requires 5, 000 units per month from Division 1?

• A)$33 per unit
• B)$35 per unit
• C)$47 per unit
• D)$50 per unit

---

Definitions:

Product

Any item or service offered to the market for consumption, use, or acquisition.

Merchandise Inventory

Goods that a company holds for the purpose of selling to customers in the ordinary course of business.

Monthly Depreciation

The portion of a fixed asset's cost allocated as an expense over a single month, reflecting the asset's decrease in value over time.

Accounts Payable

Accounts Payable is the amount of money owed by a business to its suppliers or creditors for goods and services purchased on credit.