sumer Session I1 2018 Exam # 1 35) Plish Company manufactures only one type of w

ID: 2396718 • Letter: S

Question

sumer Session I1 2018 Exam # 1 35) Plish Company manufactures only one type of washing Compressor Division, and the Fabrication Com Compressorion,wciision. The Compressor Division manufactures compressors for the Fabrication Division, which washing Division to purchase machine and has two divisions, the Division "sells" compressors to the Fabrication completes the washing machine and sells it to retailers. The Division. The market price for the Fabrication 00. (Ignore changes in inventory.) The fixed costs for the the Fabrication Division are assumed to be $8.50 per unit at 16,000 units to be the same over the range of 11,000-16,000 units. The fixed costs for Compressor's costs per compressor are. $20 $13.50 $3.00 Division fixed costs $7.50 Direct materials Direct labor Variable overhead Fabrication's costs per completed air conditioner are Direct materials Direct labor Variable overhead Division fixed costs $156.00 $63.50 $20.00 $7.50 What is the transfer method used to place a value on each compressor is 115% of variable costs? r price per compressor from the Compressor Division to the Fabrication Division if the A) $28.50 B) $41.98 C) $43.00 D) $46.50 Page 10 of 13

Explanation / Answer

Correct Answer (B) $ 41.98

Calculation

Transfer price of Compressor

Variable cost

Direct material per compressor

$ 20.00

Direct labor per Compressor

$ 13.50

Variable Overheads per Compressor

$ 3.00

Total Variable Cost

$ 36.50

Transfer price is 115% of Variable cost

115% of Variable cost

$ 41.98