The Machining Division Is Currently Operating at Capacity (2,000 Units)

question 104

Multiple Choice

The Machining Division is currently operating at capacity (2,000 units) . Its sales and cost data are: $$\begin{array} { l r } \text { Selling price per unit } & \$ 100 \\\text { Variable manufacturing costs per unit } & \$ 25 \\\text { Variable administrative costs per unit } & \$ 5 \\\text { Total fixed manufacturing overhead } & \$ 20,000 \\\text { Total fixed administrative costs } & \$ 5,000\end{array}$$ If the Assembly Division is currently buying from an outside supplier at $98 per unit, what will be the effect on overall company profits if internal sales of 2000 units from Machining to Assembly take place at the optimum transfer price?

• A) $7,000 increase
• B) $4,000 decrease
• C) $300 increase
• D) There is no effect

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Definitions:

Phagocytes

Cells that ingest and digest foreign particles, bacteria, and dead or dying cells, playing an essential role in the immune system by removing pathogens and cellular debris.

Autoimmune Disease

A condition in which the immune system mistakenly attacks and damages the body's own tissues.

Body Fluids

Liquids produced by the body, such as blood, saliva, and urine, that maintain bodily functions and protect against infection.

Major Proteins

Essential, large molecules made up of amino acids that play critical roles in the body's structure, function, and regulation of tissues and organs.