Sorenson Products Has Two Divisions: a Kitchen Wares Division That

Multiple Choice

Sorenson Products has two divisions: a kitchen wares division that manufactures ceramic dishes and a ceramic resin division that manufactures the resin used in creating ceramic products. All ceramic used by the kitchen wares division is supplied by the ceramic resin division, which also supplies resin to outside companies. What is the best transfer price for the resin, assuming that the resin division is operating at only 70 percent of capacity?

A) An amount that equates to the variable costs plus the contribution margin of the resin
B) An amount that equates to the market price of the resin
C) An amount that equates to the incremental cost of the resin
D) An amount that equates to the full cost of the resin