Materials Used by Jefferson Company in Producing Division C's Product

question 44

Multiple Choice

Materials used by Jefferson Company in producing Division C's product are currently purchased from outside suppliers at a cost of $10.00 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 25,000 units of material are transferred, with no reduction in Division A's current sales.​
-Division C's operating income will increase by

• A)$0
• B)$75,000
• C)$12,500
• D)$50,000

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Definitions:

PEST Analysis

A strategic business tool used to evaluate the external macro-environmental factors - Political, Economic, Social, and Technological - that could impact an organization.

Nonprofit Organization

An organization that operates for the public or social benefit, rather than for the profit of private owners or shareholders, and uses surplus revenues to achieve its goals.

Internal Capacity

The collective resources, skills, and competencies available within an organization that enable it to perform effectively.

External Capacity

The abilities and resources available to an organization from external sources that can be used to achieve its goals and objectives.