Division a Sells Ground Veal Internally to Division B, Which

question 142

Multiple Choice

Division A sells ground veal internally to Division B, which in turn, produces veal burgers that sell for $12 per pound. Division A incurs costs of $5.25 per pound while Division B incurs additional costs of $11.50 per pound.
What is Division A's operating income per burger, assuming the transfer price of the ground veal is set at $7.00 per burger?

• A) $1.75
• B) $2.25
• C) $8.75
• D) $4.50

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Definitions:

Net Sales

The total revenue a company generates from sales after subtracting returns, allowances, and discounts.

Increase in Accounts Receivable

A situation where the amount of money owed by customers to a company grows due to sales on credit outpacing payments received.

Credit Sales

Sales made by a business where the payment is to be received at a later date, extending credit to customers.

Accounts Receivable

Money owed to a business by its clients or customers for goods or services that have been delivered but not yet paid for.