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:

Communication Process

The transfer of information from a sender to a receiver, involving the encoding, sending, receiving, and decoding of messages.

Barriers

Refer to obstacles that companies face when trying to enter a new market or industry, including technical challenges, regulatory hurdles, and high start-up costs.

Overcome

To successfully deal with or gain control of a problem or obstacle.

Communication Skills

The ability to convey or exchange information effectively through various means.