Boat Hull Manufacturing produces boat parts at the manufacturing facility in Virginia. The managerial accountant reported that
Question:
Boat Hull Manufacturing produces boat parts at the manufacturing facility in Virginia. The managerial accountant reported that Boat Hull Manufacturing manufactures parts to repair the container ships that import products from China. The main part that Boat Hull Manufacturing produces is the T24 part. The Port Department produces the T24 part at the Boat Hull Manufacturing facility in Virginia. There is excess capacity at the facility. The managerial accountant reported the current market price of the T24 part is $1600 and reported the following manufacturing cost and expenses data:
Boat Hull Manufacturing Costs and Variable Expense ReportT24 Part
Direct materials | $905 |
Direct labor | $182 |
Variable manufacturing overhead | $110 |
Fixed manufacturing overhead (current production level) | $140 |
Variable selling expenses (only incurred on sales to outsideconsumers) | $80 |
What is the highest transfer price the selling division wouldreceive, and the buying division would pay, for the T24 part?
A.$1277
B.$905
C.$1197
D.$1600