Question : 71. Assuming an outside market exists, the maximum transfer price a : 1295685

 

 

71. Assuming an outside market exists, the maximum transfer price a selling division should charge a buying division should be: A. the variable costs of producing and selling the product.B. the fixed costs of producing and selling the product.C. the market price.D. the market price plus the contribution margin lost on outside sales.

 

72. The minimum transfer price a selling division should charge a buying division should be: A. the variable costs of producing and selling the product.B. the fixed costs of producing and selling the product.C. the market price.D. the variable costs of producing and selling the product minus the contribution margin lost on outside sales.

 

73. Which of the following statements regarding transfer pricing is false? A. A key concept in transfer pricing is that no matter the individual desires of division managers, the transfer price that provides the most benefit to the company as a whole is the one that should be chosen.B. The selling division should never try to make a profit from selling to a different division within the same company.C. The focus of transfer pricing when international divisions are involved centers on minimizing taxes, duties, and foreign currency exchange risks.D. Determining whether or not there is an outside market for the product is an important consideration when determining a transfer price.

 

74. Shane Products manufactures and sells sportswear and sports equipment. The apparel division incurs the following costs for the production of a single t-shirt when 6,000 shirts are produced each year: 

 

Direct materials

$1.25

 

Direct labor

1.00

 

Variable overhead

.75

 

Fixed overhead

   .50

 

Total cost

$3.50

 

 

 

The company sells the t-shirts to retail stores for $7.50. The sports equipment division is doing a promotion whereby each customer that purchases a tennis racket during the month of May receives a free t-shirt. The sports equipment division would like to purchase these shirts from the t-shirt division. Refer to the Shane Products information above. Assuming the t-shirt division has excess capacity and there would be no contribution margin lost on outside sales if they sell to the sports equipment division, the minimum transfer price that should be charged is: A. $7.50B. $7.00C. $3.50D. $3.00

 

75. Shane Products manufactures and sells sportswear and sports equipment. The apparel division incurs the following costs for the production of a single t-shirt when 6,000 shirts are produced each year: 

 

Direct materials

$1.25

 

Direct labor

1.00

 

Variable overhead

.75

 

Fixed overhead

   .50

 

Total cost

$3.50

 

 

 

The company sells the t-shirts to retail stores for $7.50. The sports equipment division is doing a promotion whereby each customer that purchases a tennis racket during the month of May receives a free t-shirt. The sports equipment division would like to purchase these shirts from the t-shirt division. Refer to the Shane Products information above. Assuming the t-shirt division is at full capacity, what price should they charge such that no additional losses will be incurred if they sell the shirts to the sports equipment division? A. $3.50B. $7.50C. $3.00D. $4.00

 

76. Pearson Inc. produces and sells a variety of household cleaning supplies and equipment including vacuum cleaners and carpet cleaner both of which are sold separately in stores. The carpet cleaning division incurs the following costs for the production of a single bottle of carpet cleaner when 600,000 bottles are produced each year: 

 

Direct materials

$1.30

 

Direct labor

.50

 

Variable overhead

.25

 

Fixed overhead

   .30

 

Total cost

$2.35

 

 

 

The company sells the bottles to retail stores for $5.00 per bottle. The vacuum division is doing a promotion whereby each customer that purchases a vacuum cleaner during the month of December receives a free bottle of carpet cleaner. The vacuum division would like to purchase these bottles from the carpet cleaning division. Refer to the Pearson Inc. information above. Assuming the carpet cleaning division has excess capacity and there would be no contribution margin lost on outside sales if they sell to the vacuum division, the minimum transfer price that should be charged is: A. $2.05B. $2.35C. $5.00D. $2.65

 

77. Pearson Inc. produces and sells a variety of household cleaning supplies and equipment including vacuum cleaners and carpet cleaner both of which are sold separately in stores. The carpet cleaning division incurs the following costs for the production of a single bottle of carpet cleaner when 600,000 bottles are produced each year: 

 

Direct materials

$1.30

 

Direct labor

.50

 

Variable overhead

.25

 

Fixed overhead

   .30

 

Total cost

$2.35

 

 

 

The company sells the bottles to retail stores for $5.00 per bottle. The vacuum division is doing a promotion whereby each customer that purchases a vacuum cleaner during the month of December receives a free bottle of carpet cleaner. The vacuum division would like to purchase these bottles from the carpet cleaning division. Refer to the Pearson Inc. information above. Assuming the carpet cleaning division is at full capacity, what price should they charge such that no additional losses will be incurred if they sell the bottles to the vacuum division? A. $2.05B. $2.35C. $5.00D. $2.65

 

78. The Green Division can sell its products to an outside market for $20 per unit. The division’s variable manufacturing costs are $7 per unit, and fixed manufacturing costs are $2 per unit. If the division is operating at full capacity, the opportunity cost of transferring units internally at the minimum transfer price is: A. $20B. $11C. $13D. $  9

 

79. The Automotive Division can sell one of its products to an outside market for $55 per unit. The division’s variable manufacturing costs are $14 per unit, and fixed manufacturing costs are $6 per unit. If the division is operating at full capacity, the opportunity cost of transferring units internally at the minimum transfer price is: A. $41B. $55C. $35D. $20