Question

Dockside Enterprises Incorporated operates two divisions: (1) a management division that owns and manages bulk carriers on the Great Lakes and (2) a repair division that operates a dry dock in Tampa, Florida. The repair division works on company ships and outside large-hull ships. The repair division has an estimated variable cost of $41 per labor-hour, has a backlog of work for outside ships, and charges $84 per hour for labor, which is standard for this type of work. The management division complained that it could hire its own repair workers for $52 per hour, including leasing an adequate work area.

What is the maximum transfer price per hour that the management division should pay?

Multiple Choice

• $43.

• $41.

• $84.

• $52.

Answer 1

Answer) $52

Explanations:

Maximum transfer price per hour that the management division should pay is the price for which management can arrange workers from outside.