Use the following information for questions 90 and 91. The Selling Division's unit sales price is $25 and its unit variable cost is $15. Its capacity is 10,000 units. Fixed costs per unit are $6. Current outside sales are 8,000 units. 90. What is the Selling Division's opportunity cost per unit from selling 2,000 units to the Purchasing Division? a. $10 b. $25 c. $4 d. $0 Ans: d, LO: 4. Bloom: C. Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving/Decision Making, IMA: Busines Economics Pricing 8-19 91. What is the Selling Division's opportunity cost per unit from selling 3,000 units to the Purchasing Division? a $10 b. $25 c. $4 d. $0 Styles Pane Sensitivity siyles Use the following information for questions 98-100. The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers or within the company to the Construction Division. The following data have been gathered for the coming period: Lumber Division: Capacity 200,000 board feet Price per board foot $2.50 Variable production cost per bd. ft. $1.25 Variable selling cost per bd. ft. $0.50 Construction Division: Board feet needed 60,000 Outside price paid per bd. ft. $2.00 If the Lumber Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs. 98. If current outside sales are 130,000 board feet, what is the minimum transfer price that the Lumber Division could accept? a. $1.25 b. $1.40 C. $1.75 d. $2.50 Ans: D. LO 4. Bloom: AP. D uty: Medium, Min 2. AACSB: Analytic. AICPA BB: Industry Sector Perspective, AICPA FN: M A ICPA PC: Problem Solving Decision Making. IMA Business Economics 99. If current outside sales are 150,000 board feet, what is the minimum transfer price that the Lumber Division could accept? a $2.00 b. $1.65 c. $1.40 d. $2.15 And , LO, 4, Boom AP. OMulty: Medium, Min 3, AACSB: Anal, AICPA BB: Industry Sector Perspective, AICPA FN Me t ACPA PC Problem Solving Decision Making, IMABusiness Economics 100. If the Lumber Division has sufficient excess capacity to fulfill the Construction Division's needs, what will be the effect on the company's overall contribution margin? a. Decrease by $30,000 b. Decrease by $24,000 C. Increase by $36,000 d. Increase by $33,500 nation 1914?wird Pricing 8-21 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 wou MOOIMA: Penormance 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 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 Use the following information for questions 105 and 106. The Dairy Division of Famous Foods, Inc. produces and sells milk to outside customers. The operation has the capacity to produce 200,000 gallons of milk a year. Last year's operating results were as follows: Sales (160,000) gallons $500,000 Variable costs 312.000 Contribution margin 188,000 Fixed costs 100,000 Net Income $ 88.000 105. Assume the Yogurt Division wants to purchase 30,000 gallons of milk from the Dairy Division. The minimum price that will increase the Dairy Division's profit is a. $2.50 per gallon. b. $1.18 per gallon. C. $1.95 per gallon. d. $0.55 per gallon. 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 106. Assume the Dairy Division is operating at capacity. If the Yogurt Division wants to purchase 30,000 gallons of milk from the Dairy Division, what is the minimum price that will allow the Dairy Division to maintain its current net income? a. $3.13 per gallon b. $1.18 per gallon C. $1.95 per gallon d. $0.55 per gallon Pricing 8-25 Use the following information for questions 121 and 122. The Wood Division of Fir Products, Inc. manufactures rubber moldings and sells them externally for $55. Its variable cost is $25 per unit, and its fixed cost per unit is $7. Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $32. 121. Assuming the Wood Division has available capacity of 5,000 units, the minimum transfer price it should accept is a. $7. b. $25. C. $32. d. $55. Ans: b, LO: 4, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement. AICPA PC. Problem Solving/Decision Making. IMA: Business Economics 122. Assuming the Wood Division does not have any available capacity, the minimum transfer price it should accept is a. $7. b. $25. c. $32. d. $55. Ans: , LO4, Bloom: AP. Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC Problem Solving/Decision Making. IMA: Business Economics Use the following information for questions 123 and 124. en lilin the Cand veinn to transfer 10.000 cans of its