Terrell Corporation produces various products used in the construction industry. The plumbing division produces and sells100,000 copper fittings each month. Relevant information for last month follows:

Total sales (all external) $250,000

Expenses (all on a unit base):

Variable manufacturing $0.50

Fixed manufacturing .25

Variable selling .30

Fixed selling .40

Variable G & A .15

Variable G & A .50

Total $2.10

Top-level managers are trying to determine how a transfer price can be set on a transfer of 10,000 of the copper fittings from the Plumbing Division to the Bathroom Products Division.

1. Refer to Terrell Corporation. A transfer price based on variable cost will be set at ________ per unit.

a)$0.50 b) $0.65 c) $0.95 d) $1.10

2. Refer to Terrell Corporation. A transfer price based on full production cost would be set at ______ per unit.

a) $0.75 b) $1.45 c) $1.60 d) $2.10

3. Refer to Terrell Corporation. A transfer price based on market price would be set at __________ per unit.

a) $2.10 b) $2.50 c) $1.60 d) $2.25

4. Refer to Terrell Corporation. If the Plumbing Division is operated as an autonomous investment center and its capacity is 100,000 fittings per month, the per-unit transfer price is not likely to be below

a) $0.75 b) $1.60 c) $2.10 d) $2.50