Swan Company Has Two Divisions,Hill and Paradise

question 82

Multiple Choice

Swan Company has two divisions,Hill and Paradise.Hill produces a unit that Paradise could use in its production.Paradise currently is purchasing 5,000 units from an outside supplier for $56.Hill is operating at less than full capacity and has variable costs of $30.80 per unit.The full cost to manufacture the unit is $43.40.Hill currently sells 450,000 units at a selling price of $61.60.What would be the impact on Swan Company's overall profits if the internal transfer is made?

• A)$28,000 increase
• B)$126,000 increase
• C)$7,000 decrease
• D)No change in profits

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Definitions:

Equitable Remedies

Non-monetary judicial remedies, such as injunctions or specific performance, granted when traditional legal remedies are inadequate to resolve a dispute fairly.

Adequate Remedies

Legal solutions or compensation that are considered sufficient to remedy a breach of contract or violation of rights.

Commercial Impracticability

A doctrine in contract law allowing parties to be released from their obligations due to unforeseen events that make execution of the contract excessively burdensome.

Frustration of Purpose

A doctrine in contract law that excuses performance of a contract when an unforeseen event undermines the contract's original reason for existence.