Answer the Following Question(s) Using the Information Below

question 14

Multiple Choice

Answer the following question(s) using the information below.
Cool Air Ltd. manufactures only one type of air conditioner and has two divisions, the Compressor Division, and the Assembly Division. The Compressor Division manufactures compressors for the Assembly Division, which completes the air conditioner and sells it to retailers. The Compressor Division "sells" compressors to the Assembly Division. The market price for the Assembly Division to purchase a compressor is $77. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Assembly Division are assumed to be $15.00 per unit at 10,000 units.
Compressor's costs per compressor are:
Assembly's costs per completed air conditioner are:

-If the Assembly Division sells 1,000 air conditioners at a price of $750.00 per air conditioner to customers, what is the operating income of both divisions together?

• A) $200,500
• B) $207,000
• C) $194,000
• D) $165,750
• E) $230,500

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Definitions:

Financing Activities

Transactions involving changes in the equity and borrowing of a firm as reported in its cash flow statement.

Comparative Balance Sheet

A financial statement presenting a company's financial position at different points in time, allowing for analysis of trends and changes.

Cash Dividends

Payments made by a corporation to its shareholder members. It is the share of profits and retained earnings that the company pays out to its investors.

Operating Activities

Business actions related directly to the production, sale, and delivery of goods and services, as distinguished from financing and investing activities.