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 $37 per labor-hour, has a backlog of work for outside ships, and charges $70.00 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 $45.00 per hour, including leasing an adequate work area.What is the maximum transfer price per hour that the management division should pay?
A. $45.00.
B. $37.00.
C. $70.00.
D. $33.00.
Answer: A
Business
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