Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $432 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 Instrument Division at a variable cost of $359 per unit. Assume that a transfer price of $410 has been established and that 33,300 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? c. How much would the Components Division's operating income increase?
Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $432 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 Instrument Division at a variable cost of $359 per unit. Assume that a transfer price of $410 has been established and that 33,300 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? c. How much would the Components Division's operating income increase?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $432 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 Instrument Division at a variable cost of $359 per unit.
Assume that a transfer price of $410 has been established and that 33,300 units of materials are transferred, with no reduction in the
Components Division's current sales.
a. How much would Ziegler Inc.'s total operating income increase?
b. How much would the Instrument Division's operating income increase?
c. How much would the Components Division's operating income increase?
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