Division a sells soybean paste internally to division b

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Reference no: EM13601897

1.When an industry has excess capacity, market prices may drop well below their historical average. If this drop is temporary, it is called

distress prices.
dropped prices.
low-average prices.
substitute prices.

2. The range over which two divisions will negotiate a transfer price is

between the supplying division's variable cost and the market price of the product.
between the supplying division's variable cost and its full cost of the product.
anywhere above the supplying division's full cost of the product.
between the supplying division's full cost and 180% above its full cost.

3. Division A sells soybean paste internally to Division B, which in turn, produces soybean burgers that sell for $5 per pound. Division A incurs costs of $0.75 per pound while Division B incurs additional costs of $2.50 per pound. Which of the following formulas correctly reflects the company's operating income per pound?

$5.00 - ($1.25 + $2.50) = $1.25
$5.00 - ($0.75 + $2.50) = $1.75
$5.00 - ($0.75 + $3.75) = $0.50
$5.00 - ($0.25 + $1.25 + $3.50) = 0

Reference no: EM13601897

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