Plish Company Manufactures Only One Type of Washing Machine and Has

question 115

Multiple Choice

Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $42.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 12,000-17,000 units. The fixed costs for the Fabrication Division are assumed to be $8.00 per unit at 17,000 units.

Assume the transfer price for a compressor is 145% of total costs of the Compressor Division and 1500 of the compressors are produced and transferred to the Fabrication Division. The Compressor Division's operating income is ________.

• A) $128,325
• B) $39,825
• C) $42,188
• D) $29,400

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Definitions:

End-Stage Cancer

A term used to describe cancer that is advanced and no longer responsive to curative treatments, focusing instead on palliative care.

Palliative

Relating to care that is aimed at relieving symptoms and improving the quality of life for patients with serious illnesses, rather than trying to cure the illness.

Absorption

The process by which substances such as nutrients or drugs are taken up into the bloodstream from the digestive tract or through the skin.

Distribution

The process of making a product or service available to the consumer or business user that needs it.