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 variable product costs plus a fixed fee of $210?
A)$210
B)$1,800
C)$2,100
D)$2,310

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 variable product costs plus a fixed fee of $210?
A)$210
B)$1,800
C)$2,100
D)$2,310

Quizplus · Accepted Answer

The transfer price based on variable product costs plus a fixed fee is calculated as follows: Variable costs (Direct materials + Direct labour + Variable overhead) = $600 + $1,200 + $300 = $2,100. Adding the fixed fee of $210 gives a transfer price of $2,310.

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