The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows: $$\begin{array} { l r }
\text { Direct materials } & \$ 700 \
\text { Direct labour } & 1,300 \
\text { Variable overhead } & 400 \
\text { Fixed overhead } & 350 \
\text { Market price per unit } & 2,730
\end{array}$$ What is the transfer price that is based on full cost plus a markup of 35%?
A) $585.00
B) $2,730.50
C) $2,760.00
D) $3,577.50

Question

The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 700 \
\text { Direct labour } & 1,300 \
\text { Variable overhead } & 400 \
\text { Fixed overhead } & 350 \
\text { Market price per unit } & 2,730
\end{array}$$ What is the transfer price that is based on full cost plus a markup of 35%?
A) $585.00
B) $2,730.50
C) $2,760.00
D) $3,577.50

Quizplus · Accepted Answer

The full cost is the sum of direct materials, direct labor, variable overhead, and fixed overhead: $700 + $1,300 + $400 + $350 = $2,750. A 35% markup on $2,750 is $962.50. Therefore, the transfer price is $2,750 + $962.50 = $3,712.50.

The Engine Division Provides Engines for the Tractor Division of a Company.The