Question 5

Division A, which is operating at capacity, produces a component that currently sells in a competitive market for $44 per unit. At the current level of production, the fixed cost of producing this component is $12 per unit and the variable cost is $17 per unit. Division B would like to purchase this component from Division A. The price that Division A should charge Division B for this component is:

Multiple Choice

• $17 per unit.

• $29 per unit.

• $36 per unit.

• $44 per unit.

• $61 per unit.

Selected data from Division A of Green Company are as follows:

Sales	$	620,000
Average investment	$	198,400
Operating income	$	99,200
Minimum rate of return		18	%

Division A's residual income (RI) is:

Multiple Choice

• $63,488.

• $30,256.

• $27,776.

• $17,856.

• $292,144.