Use the Following Information for Questions

question 117

Multiple Choice

Use the following information for questions
Tuttle Motorcycles Inc. manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 20,000 units to the Production Division at $1,050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $2,550 and unit variable costs and fixed costs of $1,050 and $750, respectively. The Production Division is currently paying $2,400 per unit to an outside supplier. $90 per unit can be saved on internal sales from reduced selling expenses.
-What is the increase/decrease in overall company profits if this transfer takes place?

• A) Decrease $1,200,000
• B) Increase $2,520,000
• C) Decrease $3,000,000
• D) Increase $27,000,000

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Definitions:

Strategy Construction

Creation of new procedures for processing information.

Automaticity

The ability to process information with little or no effort.

Encoding

The process of converting information into a form that can be stored in memory, part of how information is processed and retained.

Information-Processing Approach

A perspective in cognitive psychology that examines how humans interpret, store, and retrieve knowledge, paralleling human thought processes to computer operations.