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Use the following information for the next five questions.  Clothes, Inc., has an average annual demand for medium polo shirts of 18,000 units. The cost of placing an order is $90 and the cost of carrying one unit in inventory for one year is $25. The stockout cost is $5 per unit. The purchase-order lead time is 6 days. We assume there are 360 days per year. Demand for every 6 days may vary with the following probability distribution:                                                                                                             Demand for 6 days: 240 units 270 units 300 units 330 units 360 units Probability (sums to 1.00): 0.15 0.2 0.3 0.2 0.15

Assume that next month’s costs and levels of operations in the Computer and Chip Divisions are similar to this month, the minimum transfer price at which both divisions would be willing to transact internally next month is $____________ per chip.

Texas Boots Inc. is considering the production of a new line of boots. Based on preliminary market research, management has decided that each pair of boots should be priced at $300. If management believes that the profit margin should be 30 percent of sales revenue, the target cost is $____________

The maximum transfer price per pair of socks that the Eastern Division would be willing to pay for these socks is $_______________________.    

Suppose that the Eastern and Western divisions are in different countries. The corporate income tax rate is 25% for Eastern’s income and 40% for Western’s income. If Western does sell the socks to Eastern, and if the taxing authorities are willing to allow any transfer price between $4.50 and $5.75, then Sportswear will set the transfer price at $________________to lower taxes.

Assume that next month’s costs and levels of operations in the Computer and Chip Divisions are similar to this month, the maximum transfer price at which both divisions would be willing to transact internally next month is $____________ per chip.

Packer Division’s residual income without the new product line is $_____________

The annual relevant costs calculated based on EOQ is $__________. 

Craylon Corp. is planning the 2025 operating budget. Average operating assets of $1,800,000 will be used during the year and unit selling prices are expected to average $100 each. Variable costs of the division are budgeted at $500,000, while fixed costs are set at $300,000. The company’s required rate of return is 18%. The division manager receives a bonus of 50% of residual income. Assuming he achieves the 20% ROI, his anticipated bonus for 2025 is $______________.

The premium paid for a whole life policy is higher than the premium for term life​ because:  ​(Select the best answer​ below.)