The Vega Division of Ace Company Makes Wheels Which Can

question 19

Multiple Choice

The Vega Division of Ace Company makes wheels which can either be sold to outside customers or transferred to the Walsh Division of Ace Company. Last month the Walsh Division bought all 4,000 of its wheels from the Vega Division for $42 each. The following data are available from last month's operations for the Vega Company: If the Vega Division sells wheels to the Walsh Division, Vega can avoid $2 per wheel in sales commissions. An outside supplier has offered to supply wheels to the Walsh Division for $41 each.
-Suppose that Vega can sell 9,000 wheels each month to outside consumers, so transfers to the Walsh Division cut into outside sales. What should be the lowest acceptable transfer price from the perspective of the Vega Division?

• A) $28.00
• B) $31.75
• C) $41.00
• D) $42.00

---

Definitions:

Milligrams

A unit of mass in the metric system equal to one thousandth of a gram.

Provincial Budget

A financial plan specific to a province, outlining its revenues and expenditures over a fiscal period.

Forecast Expenditure

An estimate of future costs or expenses over a specified period, often used for budgeting purposes.

Minister of Education

A government official responsible for guiding and implementing national policy and programs related to education.