Timekeeper Corporation Has Two Divisions, Distribution and Manufacturing

question 49

Multiple Choice

Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high-end watches. Each division's costs are provided below:

The Distribution Division has been operating at a capacity of 4,009,000 units a week and usually purchases 2,004,500 units from the Manufacturing Division and 2,004,500 units from other suppliers at $13.00 per unit.
Assume 110,000 units are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $8.00 per unit. The Distribution Division sells the 110,000 units at a price of $18 each to customers. What is the operating income of both divisions together?

• A) $347,600
• B) $392,150
• C) $997,700
• D) $634,700

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Definitions:

Breach

The violation or breaking of a law, duty, or other form of agreement.

Goods Not Yet Delivered

Refers to items that have been sold or ordered but have not been physically moved or handed over to the buyer or recipient.

Seller and Lessor

Terms referring to parties in transactions where goods are sold (seller) or property is leased (lessor) to another party.

Specific Performance

A legal remedy in contract law requiring the breaching party to fulfill the exact terms of the contract, rather than merely compensating the aggrieved party with damages.