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

question 10

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 that Division T can sell only 10, 000 timers to outside customers.According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?

• A)$24 per timer
• B)$27 per timer
• C)$30 per timer
• D)$15 per timer

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Definitions:

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value due to use and age.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Bank Borrowings

Funds that have been obtained from a bank through various types of loans.

Cash Management

The practice of collecting, managing, and investing cash in a way that meets the financial objectives of the organization.