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

Distinguish between goods and services.

Identify the fundamental problem of economics as the need to make choices due to scarce resources.

Describe the basic categories into which resources are divided.

Comprehend the definition and role of capital in economics.

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Definitions:

Budget-gaming Problem

A situation in which managers manipulate financial allocations for personal advantage or to meet shortsighted objectives.

Compensation Scheme

a structured plan designed by organizations to determine and provide salaries, bonuses, benefits, and incentives to employees.

Target Based Pay

Target based pay is a compensation strategy that ties an employee's earnings directly to the achievement of specific performance targets.

Straight Line Pay

A compensation method where employees are paid a fixed salary or wage, without variations for overtime or performance.