TB MC Qu. 22-156 (Algo) The Tires division of...

The Tires division of Car Company makes tires for use in its Assembly division. The Tires division incurs variable costs of $261 per set of tires and has the capacity to make 1,110,000 sets of tires per year. The market price for tires is $455 per set. The Tires division incurs total fixed costs of $6,110,000 per year. If the Tires division is operating at full capacity, what transfer price should be used on the transfers between the Tires and Assembly divisions?

Multiple Choice

• $261

• $455

• $267

• $194

• $461