Question : 161. Materials used by Jefferson Company in producing Division C’s product : 1246925

161. 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

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 A’s income from operations increase? 
A. $0
B. $90,000
C. $30,000
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 Jefferson’s total income from operations increase? 
A. $45,000
B. $120,000
C. $60,000
D. $150,000

164. 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

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 would be the total savings (or additional costs) if the transfer were to take place? 
A. $4,000 Savings
B. $4,000 in additional costs
C. $8,000 Savings
D. $8,000 in additional costs

166. When is it appropriate to use the market price approach when two related companies are providing services or products to each other? 
A. The production for the selling company is falling under full capacity and it needs to increase its sales.
B. The purchasing company is currently purchasing a product at a price from an outside supplier as it would from its related company that is operating at full capacity.
C. The purchasing company is considered a cost center and is not concerned with maximizing profits for the company.
D. The policy of the parent company is that when a product is sold by an outside supplier and by a related party, purchases must be made within the company.

167. 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

168. 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

169. 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

170. 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