76.
77.
78.
79.
80.
81.
A company has two divisions, Softwoods and Hardwoods, each operating as a profit
center. The Softwood Division charges the Hardwood Division $35 per unit (for each unit
transferred to the Hardwood Division). Other data for the Softwood Division are as follows:
Variable Cost per unit
$30
Fixed Costs
$10,000
Annual Sales to the Hardwood
Division
5,000 units
Annual Sales to Outsiders
50,000
units
82.
Given the following information for Camping Division:
Selling price to outside customers
$50
Variable cost per unit
$30
Total fixed costs
$400,000
Capacity in units
25,000
15–68
83.
84.
Martin Company currently manufactures all component parts used in the manufacture of
various hand tools. The Extruding Division produces a steel handle used in three different
tools. The budget for these handles is 120,000 units with the following unit cost.
Direct material
$.60
Direct labor
.40
Variable overhead
.10
Fixed overhead
.20
Total unit cost
$1.30
Polishing Division purchases 20,000 handles from the Extruding Division and completes
the hand tools. An outside supplier, Venture Steel, has offered to supply 20,000 units of
the handle to Polishing Division for $1.25 per unit. The Extruding Division currently has
idle capacity that cannot be used.
What is the cost impact to Martin as a whole of purchasing from Venture Steel? (CMA
adapted)
85.
Martin Company currently manufactures all component parts used in the manufacture of
various hand tools. The Extruding Division produces a steel handle used in three different
tools. The budget for these handles is 120,000 units with the following unit cost.
Direct material
$.60
Direct labor
.40
Variable overhead
.10
Fixed overhead
.20
Total unit cost
$1.30
86.
Martin Company currently manufactures all component parts used in the manufacture of
various hand tools. The Extruding Division produces a steel handle used in three different
tools. The budget for these handles is 120,000 units with the following unit cost.
Direct material
$.60
Direct labor
.40
Variable overhead
.10
Fixed overhead
.20
Total unit cost
$1.30
87.
The Alpha Division of a company, which is operating at capacity, produces and sells 1,000
units of a certain electronic component in a perfectly competitive market. Revenue and
cost data are as follows: (CIA adapted)
Sales
$50,000
Variable costs
34,000
Fixed costs
12,000
88.
89.
90.
The Eastern Division sells goods internally to the Western Division at Tennessee
Company. The quoted external price in industry publications from a supplier near Eastern
is $200 per ton plus transportation. It costs $20 per ton to transport the goods to Western.
Eastern’s actual market cost per ton to buy the direct materials to make the transferred
product is $100. Actual per-ton direct labor is $50. Other actual costs of storage and
handling are $40. Tennessee Company’s president selects a $220 transfer price. This is an
example of: (CIA adapted)
91.
Which of the following is the most significant disadvantage of a cost-based transfer price?
(CIA adapted)
92.
An appropriate transfer price between two divisions of The Fathom Company can be
determined from the following data: (CIA adapted)
Fabricating Division
Market price of
subassembly
$50
Variable cost of
subassembly
$20
Excess capacity (in
units)
1,000
Assembling Division
Number of units needed
900
What is the natural bargaining range for the two divisions?
93.
A limitation of transfer prices based on actual cost is that they: (CIA adapted)
94.
Which of the following is not an appropriate use of transfer pricing?
95.
An internal transfer between two divisions is in the best economic interest of the entire
organization when:
96.
Top management intervention in settling transfer pricing disputes between two divisions
should be avoided unless
97.
The transfer price that should be used by top management in evaluating whether a
division should buy within the company or from an outside supplier is: