Spice Company Has Two Divisions,Parsley and Sage

question 22

Multiple Choice

Spice Company has two divisions,Parsley and Sage.Parsley produces a unit that Sage could use in its production.Sage currently is purchasing 50,000 units from an outside supplier for $50.Parsley is operating at less than its full capacity of 550,000 and has variable costs of $27 per unit.The full cost to manufacture the unit is $38.Parsley currently sells 450,000 units at a selling price of $54.If an internal transfer is made,variable shipping and administrative costs of $2 per unit could be avoided.What would be the impact on Spice Company's overall profits if the internal transfer were made?

• A)no change in overall profits
• B)$1,250,000 increase in profits
• C)$200,000 decrease in profits
• D)$700,000 increase in profits

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Definitions:

ATP

Within cells, the molecule adenosine triphosphate is crucial for energy conveyance essential for metabolic functions.

C4 Pathway

A photosynthetic process in some plants that captures carbon dioxide in a four-carbon compound, allowing them to thrive in high temperatures and light intensities.

Photosynthesis Efficiency

The ability of plants to convert light energy from the sun into chemical energy stored in organic compounds with minimal energy loss.

Hot Dry Climates

Climates characterized by low humidity and high temperatures, often found in desert regions and areas with a long dry season.