Division 1 of Ace Company Makes and Sells Wheels That

question 9

Multiple Choice

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 11,500 units each 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?

• A)$47.00 per unit
• B)$43.50 per unit
• C)$37.50 per unit
• D)$34.73 per unit

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Definitions:

Trade Surplus

A condition where a country's exports exceed its imports, indicating a positive balance of trade.

Exports

Products or services shipped from one nation to another for the purpose of being sold or exchanged.

Trade Deficit

A situation where a country's imports exceed its exports, leading to net outflow of domestic currency to foreign markets.

Exports

Goods or services sent from one country to another for sale or trade, contributing to a country's economy.