Delta Company sells bells to customers for $1 each. The variable cost to manufacture the bells is 10 cents. If the rattle department, a division of the Delta Company, wants to use the bells in its new line of rattles, which of the following transfer prices can be used if there is excess capacity?

 Transfer pricing is the price used to record transfers of goods across _____ of the same company.
 
multiple choice
areas
divisions Correct
perspectives
centers

Explanation
Knowledge Check 01
 
Transfer pricing is the price used to record transfers of goods across divisions of the same company.

 

Delta Company sells bells to customers for $1 each. The variable cost to manufacture the bells is 10 cents. If the rattle department, a division of the Delta Company, wants to use the bells in its new line of rattles, which of the following transfer prices can be used if there is excess capacity? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

check all that apply
$0.05Incorrect
$0.11Correct
$0.95Correct
$1.50Correct
$2.00Correct

Explanation
Knowledge Check 01
 
Because there is excess capacity, the transfer price should range from the variable cost of $0.10 to the market price of $1.00.