The North Division of Barter Company Makes and Sells a Single

question 52

Multiple Choice

The North Division of Barter Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 35,000 units and the variable cost of each unit is £24. Presently the North Division sells 32,000 units per year to outside customers at £40 per unit. The South Division of Barter Company would like to buy 15,000 units a year from North to use in its production. There would be no savings in variable costs from transferring the units internally rather than selling them externally. The lowest acceptable transfer price from the standpoint of the North Division would be closest to

• A)£36.80
• B)£24.00
• C)£32.00
• D)£40.00

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Definitions:

Skin Sense

The sensory system involved in processing touch, temperature, and pain through skin receptors.

Vestibular Organ

is the sensory system located in the inner ear that helps control balance and eye movements.

Cochlea

The coiled structure in the inner ear that contains the basilar membrane.

Olfactory Receptor Neurons

Specialized nerve cells located in the nasal cavity that detect chemical substances in the air, leading to the sense of smell.