Materials Used by Square Yard Products Inc

question 104

Multiple Choice

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales. How much would Division 6's income from operations increase?

• A) $8,000
• B) $15,000
• C) $80,000
• D) $150,000

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Definitions:

Hot Spots

Plumes of hot mantle rising to the Earth's surface, often fixed beneath a tectonic plate, which create volcanic islands and seamounts as the plate moves overhead.

Rising Plume

A vertically ascending column of one fluid through another, typically used to describe hot, buoyant material rising through the Earth's mantle.

Crustal Expressions

Refers to the physical features present on the Earth's crust, which are a result of various geological processes.

Magma Chamber

A large underground pool of liquid rock found beneath the surface of the Earth.