The Managerial Accountant at Bottles for Less Makes Internal Transfers

The managerial accountant at Bottles for Less makes internal transfers at 175% of full cost.The Refining Division purchases 25,000 containers per day,on average,from a local supplier,who delivers the containers through an external shipper.
To determine if they can reduce costs,the company located an independent supplier in Virginia who is willing to sell 25,000 containers at $20 each,delivered to the Shipping Division in Wyoming.The company in Wyoming can ship the 25,000 containers at a variable cost of $2.50 per container.
Required
Compute the full cost to the company if it purchases the containers from the independent supplier.

A) $200,000
B) $250,000
C) $300,000
D) $450,000
E) $500,000

Correct Answer:

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