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

question 64

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 A's operating income increase?

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

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Definitions:

Uses and Gratifications Theory

A theory in media studies and communication that explains how people actively seek out specific media and content to satisfy individual needs or desires.

Encoding/Decoding Model

A theory on media that combines models that privilege the media producer and models that view the audience as the primary source of meaning; this theory recognizes that media texts are created to deliver specific messages and that individuals actively interpret them.

Interpretive Community

A group of people dedicated to the consumption and interpretation of a particular cultural product and who create a collective, social meaning for the product.

Stanley Fish

An American literary theorist and legal scholar known for his work on interpretive communities and the role of the reader in determining texts' meanings.