Plish Company Manufactures Only One Type of Washing Machine and Has

Multiple Choice

Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $56.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 11,000-16,000 units. The fixed costs for the Fabrication Division are assumed to be $8.50 per unit at 16,000 units.

What is the transfer price per compressor from the Compressor Division to the Fabrication Division if the method used to place a value on each compressor is 115% of variable costs?

A) $28.50
B) $41.98
C) $43.00
D) $46.50