Division T of Clocker Company Makes a Timer Which It

question 11

Multiple Choice

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:

Return on Stockholders' Equity

A measure of financial performance calculated by dividing net income by shareholder equity, indicating how effectively a company uses investor funds.

Average Balance

The mean value of all balances held in an account over a certain period, often used to calculate interest in banking.

Ending Balance

The final amount in an account at the end of an accounting period, reflecting all transactions.

Discontinued Operation

A component of a business that has been sold, abandoned, or otherwise disposed of, which is reported separately from continuing operations on financial statements.