Materials Used by Meeta-Products Inc

question 36

Multiple Choice

Materials used by Meeta-Products Inc.in producing Division A's product are currently purchased from outside suppliers at a cost of $12 per unit.However, the same materials are available from Division B.Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $7 per unit.A transfer price of $9 per unit is established, and 35,000 units of material are transferred with no reduction in Division B's current sales. How much would Division A's operating income increase?

• A) $175,000
• B) $70,000
• C) $105,000
• D) $75,000

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Definitions:

Project A

A specified venture or task that has been named 'Project A' for identification purposes.

Interest-Only Loan

A type of loan where the borrower is required to pay only the interest on the principal balance for a set period, with the principal balance unchanged.

Principle Amount

The principal amount is the initial size of a loan or an investment, not including profits or interest.

Loan Payment

A payment made by a borrower to a lender that may include both the principal and interest.