The machining division of ITA International has a capacity of 2,000 units. Its sales and cost data are: Selling price per unit $75 Variable manufacturing costs per unit 20 Variable selling costs per unit 3 Total fixed manufacturing overhead 175,000 The machining division is currently selling 1,800 units to outside customers, and the assembly division of ITA International wants to purchase 400 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $3/unit. If the assembly division is currently buying from an outside supplier at $72 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price? The company profits would by $
The machining division of ITA International has a capacity of 2,000 units. Its sales and cost data are: Selling price per unit $75 Variable manufacturing costs per unit 20 Variable selling costs per unit 3 Total fixed manufacturing overhead 175,000 The machining division is currently selling 1,800 units to outside customers, and the assembly division of ITA International wants to purchase 400 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $3/unit. If the assembly division is currently buying from an outside supplier at $72 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price? The company profits would by $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The machining division of ITA International has a capacity of 2,000 units. Its sales and cost data are:
Selling price per unit
$75
Variable manufacturing costs per unit
20
Variable selling costs per unit
3
Total fixed manufacturing overhead
175,000
The machining division is currently selling 1,800 units to outside customers, and the assembly division of ITA International wants to purchase 400 units from machining. If
the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $3/unit. If the assembly division is currently
buying from an outside supplier at $72 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price?
The company profits would
by $
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