Materials Used by Jefferson Company in Producing Division C's Product

question 161

Multiple Choice

Materials used by Jefferson Company in producing Division C's product are currently purchased from outside suppliers at a cost of $10 per unit. However, the same materials are available from Division A Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 25,000 units of material are transferred, with no reduction in Division A's current sales.
How much would Division A's income from operations increase?

• A) $0
• B) $75,000
• C) $25,000
• D) $50,000

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Definitions:

Least Squares

A mathematical method used to determine the best-fitting line through a set of data points by minimizing the sum of the squares of the differences between observed and estimated values.

Standard Deviation

A measure of the dispersion or variability of a set of data points around the mean, indicating how spread out the data points are.

SPSS

Statistical Package for the Social Sciences, a software package used for data management and statistical analysis.

T Test

A statistical test used to compare the means of two groups and determine if they are significantly different from each other.