Answered

IDNLearn.com offers a user-friendly platform for finding and sharing knowledge. Get accurate and timely answers to your queries from our extensive network of experienced professionals.

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5.00 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 $3.00 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. Square Yard Products Inc.'s total operating income will increase by

Sagot :

Answer: $80,000

Explanation:

First, we'll need to calculate division 3's income from the increase in operations and this will be:

= (40000 × $5) - ($40000 × $3.20)

= $200,000 - $128,000

= $72000

Division 6 income from operation increase will be:

= 40000 × ($3.20 - $3.00)

= 40000 × 0.2

= $8000

Therefore, Square Yard Products Inc.'s total operating income will increase by:

= $72000 + $8000

= $80000

Thank you for using this platform to share and learn. Don't hesitate to keep asking and answering. We value every contribution you make. Thank you for choosing IDNLearn.com for your queries. We’re committed to providing accurate answers, so visit us again soon.