Figure 12-3

Multiple Choice

Figure 12-3. Grey Inc.has many divisions that are evaluated on the basis of ROI.One division,Centra,makes boxes.A second division,Mantra,makes chocolates and needs 80,000 boxes per year.Centra incurs the following costs for one box:
Centra has capacity to make 700,000 boxes per year.Mantra currently buys its boxes from an outside supplier for $1.80 each (the same price that Centra receives) .
Refer to Figure 12-3.Assume that Grey Inc.mandates that any transfers take place at full manufacturing cost.What would be the transfer price if Centra transferred boxes to Mantra?

A) $1.35
B) $1.48
C) $1.00
D) cannot be determined from the information given
E) $0.90