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:

Rhonchi

Low-pitched, rattling lung sounds that suggest blockage or secretion in the large airways.

Auscultating

The act of listening to the sounds made by internal organs, especially the lungs and heart, typically with a stethoscope, as part of a medical examination.

Pneumonia

An inflammatory condition of the lung, often caused by infection, that leads to alveolar filling with fluid or pus.