The materials used by the South Division of Eagle Company are currently purchased from outside suppliers at $30 per unit. These same materials are produced by Eagle’s North Division. Operating income assuming no transfers between divisions is $1,200,000 for the North Division and $1,360,000 for the South Division. The North Division has unused capacity and can produce the materials needed by the South Division at a variable cost of $15 per unit. The two divisions have recently negotiated a transfer price of $22 per unit for 30,000 units. Based on the agreed upon transfer price, with no reduction in the North Division’s current sales: the North Division’s operating income would increase _____; the South Division’s operating income would increase _____; and the Eagle Company’s operating income would increase _____. $210,000; $240,000; $450,000 $210,000; $450;000; $240,000 $240,000; $210,000; $450,000 $240,000; $450,000; $210,000 none of the above
The materials used by the South Division of Eagle Company are currently purchased from outside suppliers at $30 per unit. These same materials are produced by Eagle’s North Division. Operating income assuming no transfers between divisions is $1,200,000 for the North Division and $1,360,000 for the South Division.
The North Division has unused capacity and can produce the materials needed by the South Division at a variable cost of $15 per unit. The two divisions have recently negotiated a transfer price of $22 per unit for 30,000 units. Based on the agreed upon transfer price, with no reduction in the North Division’s current sales: the North Division’s operating income would increase _____; the South Division’s operating income would increase _____; and the Eagle Company’s operating income would increase _____.
- $210,000; $240,000; $450,000
- $210,000; $450;000; $240,000
- $240,000; $210,000; $450,000
- $240,000; $450,000; $210,000
- none of the above
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