Materials Used by Beta-Products Inc

question 125

Multiple Choice

Materials used by Beta-Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $15 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 $12 per unit. A transfer price of $13 per unit is established, and 50,000 units of material are transferred with no reduction in Division 6's current sales. How much would Division 3's income from operations increase?

• A) $150,000
• B) $50,000
• C) $100,000
• D) $25,000

---

Definitions:

Capacity

The maximum amount that something can contain or produce, or the ability to perform, understand, or absorb something.

Flightless Birds

Birds that have evolved in such a way that they are unable to fly, often having smaller wing bones and a heavier, more robust body structure.

Biogeographical

Pertaining to the distribution of plants and animals in different regions and ecosystems across the world.

Cenozoic Era

The current geological era, beginning 66 million years ago, following the mass extinction of the dinosaurs and characterized by the rise of mammals.