Materials used by the Truck Division of Goldman Motors are currently purchased from outside suppliers at a

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Materials used by the Truck Division of Goldman Motors are currently purchased from outside suppliers at a cost of $310 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Truck Division at a variable cost of $250 per unit.

a. If a transfer price of $272 per unit is established and 25,000 units of materials are transferred, with no reduction in the Components Division’s current sales, how much would Goldman Motors’ total income from operations increase?

b. How much would the Truck Division’s income from operations increase?

c. How much would the Components Division’s income from operations increase?


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Related Book For  answer-question

Financial and Managerial Accounting

ISBN: 978-0538480895

11th Edition

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

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