A marble factory has two divisions: Kiln Division and Painting Division. The Kiln Division had Sales of $33,000 and Variable Costs of $25,000 while the Painting Division had Sales of $30,000 and Variable Costs of $21,000. Production and sales for each division are 66,000 pounds. The Kiln Division sells its all-unpainted marble to the Painting Division and does not sell to anyone else. What is the current transfer price?
A) $0.12 per pound
B) $0.14 per pound
C) $0.45 per pound
D) $0.50 per pound

Question

Quizplus · Accepted Answer

This question requires familiarity with the way that transfer pricing is calculated by dividing sales by the number of units sold. For this question, focus on the numbers attributable to the Kiln Division since it is they who will be transferring the materials rather than selling them to an outside market. Current transfer price = $33,000/66,000 = $0.50 per pound (Choice D).

A Marble Factory Has Two Divisions: Kiln Division and Painting