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:

High Rates

A term often used to indicate the elevated frequency or level of a particular occurrence, such as interest rates, inflation, or unemployment.

Learned Helplessness

A condition in which a person suffers from a sense of powerlessness, arising from a traumatic event or persistent failure to succeed. It is thought to be one of the underlying causes of depression.

Generalization

The process of drawing a broad conclusion based on specific instances, applying a rule or observation to similar situations.

Partial Reinforcement

A learning condition in which only some of the organism’s responses are reinforced.