Figure 20-6 Callahan Industries Is a Decentralized Company That Evaluates Its Divisions

Multiple Choice

Figure 20-6
Callahan Industries is a decentralized company that evaluates its divisions based on ROI. The Jones Division has the capacity to make 5,000 units of a component. The Jones Division's variable costs are £200 per unit.
The Thomas Division can use the component in one of its products. The Thomas Division would incur £100 of variable costs to put the component in its own product that sells for £500.
-Refer to Figure 20-6. The Jones Division can sell all that it produces for £360 each. The Jones Division needs 200 units. What is the correct transfer price?

A) £400
B) £200
C) £420
D) £360