The Chasis Division Provides Frames for the Tractor Division of a Company

Multiple Choice

The Chasis Division provides frames for the Tractor Division of a company. The standard unit costs for the Chasis Division are as follows: $\begin{array} { l } \text {Direct materials }&\$800\\ \text { Direct labor}&1,500\\ \text {Variable overhead }&40\\ \text {Fixed overhead }&350\\ \text { Market price per unit}&4,575\\\end{array}$
What is the transfer price based on full cost plus a markup of 20 percent?

A) $5,490
B) $4,575
C) $3,240
D) $3,660