Use the following information for questions 101 and 102. Tuttle Motorcycles Inc. manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 20,000 units to the Production Division at $1,050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $2,550 and unit variable costs and fixed costs of $1,050 and $750, respectively. The Production Division is currently paying $2,400 per unit to an outside supplier. $90 per unit can be saved on internal sales from reduced selling expenses. 101. What is the minimum transfer price that the Engine Division should accept? a. $2,460 b. $2,550 c. $2,400 d. $1,500 Ans: a, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving/Decision Making, IMA: Business Economics 102. What is the increase/decrease in overall company profits if this transfer takes place? a. Decrease $1,200,000 b. Increase $2,520,000 c. Decrease $3,000,000 d. Increase $27,000,000 Ans: a, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC Problem Solving/Decision Making, IMA: Performance Measurement Use the following information for questions 103 and 104. The Can Division of Fruit Products Inc. manufactures and sells tin cans externally for $0.60 per can. Its unit variable costs and unit fixed costs are $0.24 and $0.08, respectively. The Packaging Division wants to purchase 50,000 cans at $0.32 a can. Selling internally will save $0.02 a can. 103. Assuming the Can Division has sufficient capacity, what is the minimum transfer price it should accept? a. $0.24 b. $0.32 c. $0.22 d. $0.30 Ans: C, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving/Decision Making, IMA: Business Economics 104. Assuming the Can Division is already operating at full capacity, what is the minimum transfer price it should accept? a. $0.58 b. $0.66 c. $0.28 d. $0.34