Answer:
(1) option (d) $72,000 (2) option (a)$8,000 (3) option (c)$80,000
Explanation:
Solution
Given:
Now,
(1) The total cost to be paid to the supplier outside is given below:
= 40,000 units x $5 per unit
= $200,000
The price of transfer to be paid to Division 6 is given as:
= 40,000 units x $3.20 per = $128,000
Therefore, the increase in income from operations for Division C is = $200,000 - $128,000 = = $72,000
(2) The income increase from operations is defined below:
Additional Sales x Contribution Per Unit
Thus,
The per unit contribution = Transfer Price – Variable Cost
= $3.20 - $3 = $0.20 per unit
Hence,
The income increase from operations for Division 6 is given as:
= 40,000 units x $0.20 per unit = $8,000
(3) Now,
The Increase of Income from operations for Division C and the Increase in income from operations for Division 6 becomes,
= $72,000 + $8000 = $80,000
