Answer the Following Questions Using the Information Below:
Timekeeper Corporation

question 47

Multiple Choice

Answer the following questions using the information below:
Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high-end watches. Each division's costs are provided below:
$$\begin{array} { l c l } \text { Manufacturing: } & \text { Variable costs per unit } & \$ 1.00 \\& \text { Fixed costs per unit } & \$ 5.00 \\\text { Distribution: } & \text { Variable costs per unit } & \$ 0.60 \\& \text { Fiæed costs per unit } & \$ 0.40\end{array}$$ The Distribution Division has been operating at a capacity of 4,000,000 units a week and usually purchases 2,000,000 units from the Manufacturing Division and 2,000,000 units from other suppliers at $9.00 per unit.
-Assume 100,000 pounds are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $8.00 per pound.The Distribution Division sells the 100,000 pounds at a price of $11.00 each to customers.What is the operating income of both divisions together?

• A) $200,000
• B) $300,000
• C) $400,000
• D) $500,000

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Definitions:

Cold Drinks

Beverages that are served chilled, often including sodas, iced teas, and various types of juices.

Temperature

A physical quantity expressing the subjective perceptions of hot and cold, measured by a thermometer.

Increased

A term denoting a situation or quantity that has grown or become larger or greater in size, volume, number, or degree.

Negatively Related

A term describing two variables that move in opposite directions, where an increase in one leads to a decrease in the other.