Cascade Cliffs, Inc., operates two divisions: (1) a management division that own
ID: 2481348 • Letter: C
Question
Cascade Cliffs, Inc., 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 Cheboygan, Michigan. The repair division works on company ships, as well as other large-hull ships.
The repair division has an estimated variable cost of $41.5 per labor-hour. The repair division has a backlog of work for outside ships. They charge $79.00 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 $49.50 per hour, including leasing an adequate work area.
Cascade Cliffs, Inc., 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 Cheboygan, Michigan. The repair division works on company ships, as well as other large-hull ships.
The repair division has an estimated variable cost of $41.5 per labor-hour. The repair division has a backlog of work for outside ships. They charge $79.00 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 $49.50 per hour, including leasing an adequate work area.
What is the maximum transfer price per hour that the management division should pay?Explanation / Answer
Answer=$49.50 per hour
This is the maximum management division should pay because this is the rate available if it could hire its own repair workers including leasing an adequate work area.