Hydroxide Company Has Two Divisions, the Blending Division and Canning

question 42

Multiple Choice

Hydroxide Company has two divisions, the Blending Division and Canning Division. The Blending Division sells chemicals to the Canning Division. Standard costs for the Blending Division are as follows:
Direct materials $3.00 per gallon
Direct labor 2.40 per gallon
The Canning Division uses the following predetermined overhead rate:
Variable overhead $3.60 per gallon
Fixed overhead 2.40 per gallon
Total $6.00 per gallon
What is the transfer price for the chemicals per gallon based on standard variable cost?

• A) $3.00
• B) $9.00
• C) $5.40
• D) $11.40