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Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5.00 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3.00 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales.
-Division 6's operating income will increase by
Rent
A regular payment made by a tenant to an owner for the use of the owner’s building, land, or other property.
Nominal Interest Rates
The interest rates before taking inflation into account, often quoted by financial institutions.
Real Interest Rates
The interest rate adjusted for inflation, representing the true cost of borrowing and the true yield on an investment.
Irving Fisher
An American economist known for his contributions in the fields of economics and statistics, including the theory of interest and the Fisher equation.
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