Materials Used by Beta-Products Inc

question 29

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 6's income from operations increase?

• A) $75,000
• B) $150,000
• C) $100,000
• D) $50,000

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Definitions:

Total Revenue

The overall amount of money generated from the sale of goods or services before subtracting any expenses.

Determinants Of Elasticity

Factors that influence the sensitivity of the quantity demanded or supplied of a good to price changes.

Availability Of Substitutes

The extent to which similar or alternative products and services are accessible to consumers, influencing their choices and market demand.

Linear Demand

An economic model where demand for a good or service changes proportionately with changes in price.