The Engine Division provides engines for the Tractor Division of a company. The standard unit costs for Engine Division are as follows:
$$\begin{array} { l r }
\text { Direct materals }&\$600 \
\text { Direct labour } & 1,200 \
\text { Variable overhead } & 300 \
\text { Fixed overhead } & 150 \
\text { Market price per unit } & 2,730
\end{array}$$
-Refer to the figure.What is the transfer price based on full cost plus a markup of 30 percent?
A)$585
B)$2,730
C)$2,760
D)$2,925

Question

The Engine Division provides engines for the Tractor Division of a company. The standard unit costs for Engine Division are as follows:
$$\begin{array} { l r } 
\text { Direct materals }&\$600 \
\text { Direct labour } & 1,200 \
\text { Variable overhead } & 300 \
\text { Fixed overhead } & 150 \
\text { Market price per unit } & 2,730
\end{array}$$
-Refer to the figure.What is the transfer price based on full cost plus a markup of 30 percent?
A)$585
B)$2,730
C)$2,760
D)$2,925

Quizplus · Accepted Answer

The full cost is calculated by adding direct materials, direct labor, variable overhead, and fixed overhead: $600 + $1,200 + $300 + $150 = $2,250. A markup of 30 percent on the full cost is $2,250 * 0.30 = $675. Therefore, the transfer price is $2,250 + $675 = $2,925.

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