Materials used by the company in producing Division C\'s product are currently p
ID: 2368053 • Letter: M
Question
Materials used by the company in producing Division C's product are currently purchased from outside suppliers at a cost of $15 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $10.00 per unit. A transfer price of $11.00 per unit is negotiated and 60,000 units of material are transferred, with no reduction in Division A's current sales. How much would Division A's income from operations increase? $0 $30,000 $60,000 $90,000Explanation / Answer
Income increases by (11 - 10) * 60,000 = $60,000
Hence c) $60,000