Question 20 (4 points) Z Inc. has Division R that manufactures a component that

Question

Question 20 (4 points)

Z Inc. has Division R that manufactures a component that it sells for $170 and with a variable cost of $75. Another division of Z Inc. wants to purchase the component. An outside company also sells the component for $180. Using the General Transfer-Pricing rule, what is the transfer price if Division R is operating at capacity?

Question 20 options:

$180

$95

$170

$75

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Question 21 (4 points)

W Inc. has Division T that manufactures a component that it sells for $80 and with a variable cost of $25. Another division of W Inc. wants to purchase the component. An outside company also sells the component for $90. Using the General Transfer-Pricing rule, what is the transfer price if Division T has excess capacity?

Question 21 options:

$55

$80

$90

$25

a)

$180

b)

$95

c)

$170

d)

$75

Explanation / Answer

20 The transfer price if Division R is operating at capacity is the price to outside customers which is $170 21 The transfer price if Division T has excess capacity is the variable cost which is $25

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