Question : 161. Materials used by Square Yard Products Inc. in producing Division : 1251702

161. Materials used by Square Yard Products Inc. in producing Division 3’s product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6’s current sales.

How much would Square Yard Products total income from operations increase? 
A. $32,000
B. $112,000
C. $80,000
D. $150,000

162. Materials used by Jefferson Company in producing Division C’s product are currently purchased from outside suppliers at a cost of $10 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 30,000 units of material are transferred, with no reduction in Division A’s current sales.

How much would Division C’s income from operations increase? 
A. $0
B. $90,000
C. $15,000
D. $60,000

163. Materials used by Jefferson Company in producing Division C’s product are currently purchased from outside suppliers at a cost of $10 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 30,000 units of material are transferred, with no reduction in Division A’s current sales.

How much would Division A’s income from operations increase? 
A. $0
B. $90,000
C. $30,000
D. $60,000

164. Materials used by Jefferson Company in producing Division C’s product are currently purchased from outside suppliers at a cost of $10 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 30,000 units of material are transferred, with no reduction in Division A’s current sales.

How much would Jefferson’s total income from operations increase? 
A. $45,000
B. $120,000
C. $60,000
D. $150,000

165. The Ukulele Company’s radio division currently is purchasing transistors from the Xiang Co. for $3.50 each. The total number of transistors needed is 8,000 per month. Ukulele Company’s electronics division can produce the transistors for a cost of $4.00 each and they have plenty of capacity to manufacture the units.  The $4 is made up of $3 in variable costs, and $1 in allocated fixed costs.

What should be the range of a possible transfer price? 
A. No transfer should take place.
B. $3.51 to $3.99
C. $3.01 to $3.99
D. $3.01 to $3.49

166. Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers? 
A. Market Price
B. Cost Price
C. Negotiated Price
D. Variable Price

167. The transfer price which uses a variety of cost concepts is the 
A. Negotiated Price Approach
B. Standard Cost Approach
C. Cost Price Approach
D. Market Price Approach

168. The transfer price that must be less than the market price but greater than the supplying division’s variable costs per unit is called 
A. the cost price approach
B. the negotiated cost approach
C. the standard cost approach
D. the market price approach

169. Mandolin Company has two divisions. Division A is interested in purchasing 10,000 units from Division B. Capacity is available for Division B to produce these units. The per unit market price is $30 per unit, with a variable cost of $17. The manager of Division A has offered to purchase the units at $15 per unit. In an effort to make this transfer price beneficial for the company as a whole, what is the range of prices that should be used during negotiations between the two divisions? 
A. $15 to $30
B. $15 to $17
C. over $30
D. $17 to $30

170. ABC Corporation has three service departments with the following costs and activity base:
 

Service DepartmentCostActivity Base for Allocation

Graphics Production$200,000# of copies

Accounting$500,000# of invoices processed

Personnel Department$400,000# of employees

ABC has three operating divisions, Micro, Macro and Super.  Their revenue, cost and activity information are as follows:
 

MicroMacroSuper

Direct Revenues$700,000$850,000$650,000

Direct Operating Expenses$50,000$70,000$100,000

# of copies made20,00030,00050,000

# invoices processed700800500

# of employees130145125