Plish Company Manufactures Only One Type of Washing Machine and Has

question 89

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 $60.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 13,000-18,000 units. The fixed costs for the Fabrication Division are assumed to be $11.00 per unit at 18,000 units.

If the Fabrication Division sells 1000 air conditioners at a price of $475.00 per washing machine to customers, what is the operating income of both divisions together?

• A) $167,500
• B) $169,500
• C) $151,000
• D) $147,000

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Definitions:

FIFO

"First In, First Out," an inventory valuation method where the oldest inventory items are recorded as sold first.

Perpetual Inventory System

A method of accounting for inventory that records sales and purchases of inventory instantly through the use of computerized point-of-sale systems and enterprise asset management software.

FIFO

An inventory valuation method that assumes the first items placed in inventory are the first sold (First In, First Out).