Materials Used by Boone Company in Producing Division C's Product

question 82

Multiple Choice

Materials used by Boone Company in producing Division C's product are currently purchased from outside suppliers at a cost of $20 per unit.However, the same materials are available from Division A.Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $17 per unit.A transfer price of $19 per unit is negotiated and 60,000 units of material are transferred, with no reduction in Division A's current sales. How much would Division C's operating income increase?

• A) $0
• B) $180,000
• C) $60,000
• D) $120,000

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Definitions:

Proactive Interference

The phenomenon where old memories interfere with the recall of new memories.

Encoding Specificity Principle

The principle that recall is most effective when information available at the time of recall is similar to the information available at the time of encoding.

Depth-Of-Processing Principle

A concept suggesting that information that is thought about at a deeper, more meaningful level is more likely to be remembered than information processed at a superficial level.

State-Dependent Memory

The phenomenon wherein information learned in a particular state of mind is more readily recalled when in the same state.