Swan Company Has Two Divisions,Hill and Paradise

question 71

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.How much will Paradise save by not purchasing from outside if a transfer price of $42 is agreed upon?

• A)$70,000
• B)$56,000
• C)$7,000 more cost
• D)$28,000

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Definitions:

Economics Class

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Confidence Interval

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