(Appendix 12A)Division T of Clocker Company Makes a Timer Which

question 3

Multiple Choice

(Appendix 12A) Division T of Clocker Company makes a timer which it sells for $30 to outside customers.The division has supplied the following data concerning the timer: Division S of Clocker Company is currently buying 5, 000 similar timers each month from an overseas supplier at $27 each.Division S would like to acquire its timers from Division T if the price is right. Suppose Division T is operating at capacity and can sell all of the timers it produces to outside customers at its usual selling price.According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?

• A)$30 per timer
• B)$27 per timer
• C)$25 per timer
• D)$15 per timer

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Definitions:

Acceptance

An agreement by one party to the terms of the offer made by another.

Revocation

The action of rescinding or recalling a decision, law, license, or agreement, making it no longer valid.

Tendered Bid

A formal offer submitted in response to an invitation to bid for a project, often including price and terms of service.

Caveat Emptor

A Latin phrase meaning "let the buyer beware," implying that the buyer assumes the risk about the quality and condition of the product being sold.