Cool Air Ltd. manufactures only one type of air conditioner and has two divisions, the Compressor division, and the Assembly division. The Compressor division manufactures compressors for the Assembly division, which completes the air conditioner and sells it to retailers. The Compressor division "sells" compressors to the Assembly division. The market price for the Assembly division to purchase a compressor is $77. (Ignore changes in inventory.) The fixed costs for the Compressor division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Assembly division are assumed to be $15 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials $34.00 Direct labour $14.50 Variable overhead $6.00 Division fixed costs $15.00 Assembly's costs per completed air conditioner are: Direct materials $300.00 Direct labour $125.00 Variable overhead $40.00 Division fixed costs $15.00

What is the market-based transfer price per compressor from the Compressor division to the Assembly division?

Select one:

a.$34.00

b.$54.50

c.$69.50

d.$77.00

e.$115.50

What is the transfer price per compressor from the Compressor division to the Assembly division if the method used to place a value on each compressor is 150% of variable costs?

Select one:

a.$81.75

b.$77.00

c.$9.00

d.$72.75

e.$51.00

Assume the transfer price for a compressor is 150% of total costs of the Compressor division and 1,000 of the compressors are produced and transferred to the Assembly division. The Compressor division's operating income is:

Select one:

a.$31,750

b.$32,750

c.$34,750

d.$36,500

e.$49,750