Division T of Clocker Company Makes a Timer Which It

question 19

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 Division T is operating at capacity and can sell all of the timers it produces to outside customers at its usual selling price. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?

• A)$30 per timer
• B)$27 per timer
• C)$25 per timer
• D)$15 per timer

---

Definitions:

Industry Expands

The process of growth within a specific sector of the economy, characterized by an increase in output, sales, or the number of operators.

Average Total Cost Curve

A graphical representation showing the average total cost of producing different quantities of output.

Purely Competitive Firm

A company that operates in a market where there are many buyers and sellers, the products are homogeneous, and there are no barriers to entering or exiting the market.

Economic Profit

The financial delta observed when a business's total outgoings, including every form of cost, are removed from its total intake.