The goal of setting a transfer price is to a. maximize the overall profit of the...

The goal of setting a transfer price is to

	a.	maximize the overall profit of the organization.
	b.	motivate managers to behave in the best interest of the firm as a whole.
	c.	ensure that all divisions have the resources they need to operate.
	d.	maximize the profit of the transferring division.

Vogue Limited manufactures 75,000 digital cameras each year. Vogue has been producing the lenses internally. However, late last year the company received an offer to produce the 150,000 lenses the company uses each year for a total contract price of $380,000. When Vogue manufactures the lenses internally, direct materials cost $1.05 per lens, direct labor is $0.65 per lens, and variable overhead is $0.30 per lens. Vogue’s total overhead is $110,000. If the lens were purchased, $28,000 of fixed overhead could be avoided.

What is the total relevant cost to produce the lenses internally?

	a.	$410,000
	b.	$380,000
	c.	$328,000
	d.	$382,000

Expert Solution

ekkarill92 answered 2 years ago

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