Answer the following question(s)using the information below.Cool Air Ltd.manufactures only one type of air conditioner and has two divisions, the Compressor Division, and the Assembly Division.The Compressor Division manufactures compressors for the Assembly Division, which completes the air conditioner and sells them to retailers.The Compressor Division "sells" compressors to the Assembly Division.The market price for the Assembly Division to purchase a compressor is $77.(Ignore changes in inventory.)The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units.The fixed costs for the Assembly Division are assumed to be $15.00 per unit at 10,000 units.Compressor's costs per compressor are:
Assembly's costs per completed air conditioner are:

-What is the transfer price per compressor from the Compressor Division to the Assembly Division if the method used to place a value on each compressor is 150% of variable costs?
A)$81.75
B)$77.00
C)$9.00
D)$72.75
E)$51.00

Question

Answer the following question(s)using the information below.Cool Air Ltd.manufactures only one type of air conditioner and has two divisions, the Compressor Division, and the Assembly Division.The Compressor Division manufactures compressors for the Assembly Division, which completes the air conditioner and sells them to retailers.The Compressor Division "sells" compressors to the Assembly Division.The market price for the Assembly Division to purchase a compressor is $77.(Ignore changes in inventory.)The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units.The fixed costs for the Assembly Division are assumed to be $15.00 per unit at 10,000 units.Compressor's costs per compressor are:
  Assembly's costs per completed air conditioner are:
 
-What is the transfer price per compressor from the Compressor Division to the Assembly Division if the method used to place a value on each compressor is 150% of variable costs?
A)$81.75 
B)$77.00 
C)$9.00 
D)$72.75 
E)$51.00

Quizplus · Accepted Answer

If the transfer price is 150% of variable costs, then the variable cost per compressor is $27.50 ($55/2). Therefore, the transfer price per compressor is $41.25 ($27.50 x 150%) + $40 (fixed cost per compressor) = $81.75.

Answer the Following Question(s)using the Information Below