Timekeeper Corporation has two divisions,Distribution and Manufacturing.The company's primary product is high-end watches.Each division's costs are provided below:

The Distribution Division has been operating at a capacity of 4,010,000 units a week and usually purchases 2,005,000 units from the Manufacturing Division and 2,005,000 units from other suppliers at $15.00 per unit.
What is the transfer price per watch from the Manufacturing Division to the Distribution Division,assuming the method used to place a value on each transfer is 125% of full costs?
A)$11.49
B)$14.36
C)$15.00
D)$19.25

Question

Timekeeper Corporation has two divisions,Distribution and Manufacturing.The company's primary product is high-end watches.Each division's costs are provided below:

The Distribution Division has been operating at a capacity of 4,010,000 units a week and usually purchases 2,005,000 units from the Manufacturing Division and 2,005,000 units from other suppliers at $15.00 per unit.
What is the transfer price per watch from the Manufacturing Division to the Distribution Division,assuming the method used to place a value on each transfer is 125% of full costs?
A)$11.49 
B)$14.36 
C)$15.00 
D)$19.25

Quizplus · Accepted Answer

Transfer price = 1.25 × $11.49 = $14.36

Timekeeper Corporation Has Two Divisions,Distribution and Manufacturing