Answer the Following Questions Using the Information Below:
NSW Farmers

question 112

Multiple Choice

Answer the following questions using the information below:
NSW Farmers Coop has two divisions: Distribution and Production.The company's primary product is fertiliser.Each division's costs are provided below:
$$\begin{array} { l r l } \text { Production: } & \text { Variable costs per kilo } & \$ 0.05 \\& \text { Fixed costs per kilo } & \$ 0.25 \\\text { Distribution: } & \text { Variable costs per kilo } & \$ 0.03 \\& \text { Fixed costs per kilo } & \$ 0.02\end{array}$$ The Distribution Division has been operating at a capacity of 4 000 000 kilos a week and usually purchases 2 000 000 kilos from the Production Division and 2 000 000 kilos from other suppliers at $0.45 per kilo.
-Assume 100 000 kilos are transferred from the Production Division to the Distribution Division for a transfer price of $0.40 per kilo.The Distribution Division sells the 100 000 kilos at a price of $0.55 each to customers.What is the operating profit of both divisions together?

• A)$15 000
• B)$10 000
• C)$20 000
• D)$25 000

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Definitions:

Accumulated Depreciation

The aggregate cost of a tangible asset that has been amortized as a depreciation expense from the time the asset started being used.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal.

Correcting Entries

Journal entries made to correct errors found in the accounting records after the posting process.

Service Revenue

Income earned by a company for the services it has provided to its customers.