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

question 78

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 C's income from operations increase?

• A) $0
• B) $75,000
• C) $12,500
• D) $50,000

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Definitions:

Strategy Statement

A clear and concise description of the strategy of an organization, outlining its unique value proposition, target customers, and key tactics or actions.

Objective Statement

A brief statement that clearly expresses the goals and objectives of an individual or organization.

Realistic Component

An element or aspect that adds a sense of realism or authenticity to a scenario, project, or simulation.

Effective Objectives

Clearly defined goals that are measurable, achievable, relevant, and time-bound, directing strategic actions.