Naperville Company has two divisions: the Mixing Division and Bottling Division. The Mixing Division sells beverage mix to the Bottling Division. Standard costs for the Mixing Division are as follows:
The Mixing Division uses the following predetermined overhead rate:
What is the transfer price for the beverage mix per gallon based on standard absorption cost plus a markup of 30 percent?
A) $ 5.35
B) $ 6.24
C) $ 8.70
D) $ 4.75

Question

Naperville Company has two divisions: the Mixing Division and Bottling Division. The Mixing Division sells beverage mix to the Bottling Division. Standard costs for the Mixing Division are as follows:
 The Mixing Division uses the following predetermined overhead rate:
 What is the transfer price for the beverage mix per gallon based on standard absorption cost plus a markup of 30 percent?
A) $ 5.35 
B) $ 6.24 
C) $ 8.70 
D) $ 4.75

Quizplus · Accepted Answer

[Direct materials ($2.00) + Direct labor ($.80) + Variable overhead ($1.20) + Fixed overhead ($.80)]
= $4.80 x 1.30 = $6.24 per gallon

Naperville Company Has Two Divisions: the Mixing Division and Bottling