Thursday, February 14, 2013

Crush Company makes internal transfers at 160% of full cost

ACCOUNTING

Multiple Choice

Crush Company makes internal transfers at 160% of full cost. The Soda Refining Division purchases 40,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for $40 per container via an external shipper. In order to reduce costs, the company located an independent supplier in Illinois who is willing to sell 40,000 containers at $30 each, delivered to Crush Company's Shipping Division in Missouri. The company's Shipping Division in Missouri has excess capacity and can ship the 40,000 containers at a variable cost of $4.50 per container. What is the total cost of purchasing the water from the Illinois supplier and shipping it to the Soda Division?

a. $1,200,000

b. $1,380,000

c. $1,600,000

d. $180,000

Click here for the SOLUTION

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