Cascade Cliffs,Inc. ,operates two divisions: (1)a management division that owns and manages bulk carriers on the Great Lakes and (2)a repair division that operates a dry dock in Cheboygan,Michigan.The repair division works on company ships,as well as other large-hull ships.The repair division has an estimated variable cost of $37 per labor-hour.The repair division has a backlog of work for outside ships.They charge $70.00 per hour for labor,which is standard for this type of work.The management division complained that it could hire its own repair workers for $45.00 per hour,including leasing an adequate work area.What is the maximum transfer price per hour that the management division should pay?
A)$33.00.
B)$37.00.
C)$45.00.
D)$70.00.

Question

Quizplus · Accepted Answer

The maximum transfer price the management division should pay is $45.00 per hour, as this is the cost they would incur if they hired their own repair workers and leased a work area.