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

question 197

Multiple Choice

Materials used by Jefferson Company in producing Division C's product are currently purchased from outside suppliers at a cost of $10 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.
How much will Division A's income from operations increase?

• A) $0
• B) $75,000
• C) $25,000
• D) $50,000

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Definitions:

Thermotherapy

Treatment using heat for therapeutic purposes to relieve pain and promote healing.

Swing-through Gait

A swing-through gait is a type of walking pattern where an individual moves both crutches forward and then swings both legs through the crutches, often used by people with lower limb disabilities.

Two-point Gait

A walking method using two points of support, such as crutches or canes, alternately with either foot to aid in mobility.

Therapeutic Reasons

Motivations or purposes related to the healing or treatment of disease, used to justify a particular medical approach or intervention.