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

question 97

Multiple Choice

Materials used by Boone Company in producing Division C's product are currently purchased from outside suppliers at a cost of $20 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 $17 per unit. A transfer price of $19 per unit is negotiated and 60,000 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) $180,000
• C) $60,000
• D) $120,000

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Definitions:

Excitatory

Referring to neurons or substances that increase the likelihood of a neuron firing, thus promoting neural activity.

Inhibitory

Describes something that restrains, blocks, or suppresses a specific action, process, or reaction in biological or chemical systems.

Limbic System

A complex system of nerves and networks in the brain, involved in basic emotions such as fear and pleasure, and drives such as hunger and sex.

Hypothalamus

A region of the brain that regulates bodily functions including temperature, hunger, and thirst.