Materials Used by Square Yard Products Inc

question 56

Multiple Choice

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 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 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.
How much will Square Yard Products total income from operations increase?

• A) $32,000
• B) $112,000
• C) $80,000
• D) $150,000

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Definitions:

Price Elasticity Of Supply

The ratio of the percentage change in quantity supplied of a product or resource to the percentage change in its price; a measure of the responsiveness of producers to a change in the price of a product or resource.

Supply Of A Product

The total amount of a specific good or service that is available for purchase at various prices in a given market.

Price Elasticity Of Demand

An indicator of the sensitivity of demand for a product to fluctuations in its price.

Quantity Of Tickets

The number of tickets available or sold for an event.