Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high−end watches. Each division's costs are provided below: Manufacturing:Variable costs per unit $1.81 Fixed costs per unit $9.52 Distribution: Variable costs per unit $1.20 Fixed costs per unit $1.00 The Distribution Division has been operating at a capacity of 4,003,000 units a week and usually purchases 2,001,500 units from the Manufacturing Division and 2,001,500 units from other suppliers at $13.50 per unit. Assume 100,000 units are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $10.00 per unit. The Distribution Division sells the 100,000 units at a price of $17 each to customers. What is the operating income of both divisions together? A. $566,500 B. $952,000 C. $347,000 D. $401,000
Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high−end watches. Each division's costs are provided below: Manufacturing:Variable costs per unit $1.81 Fixed costs per unit $9.52 Distribution: Variable costs per unit $1.20 Fixed costs per unit $1.00 The Distribution Division has been operating at a capacity of 4,003,000 units a week and usually purchases 2,001,500 units from the Manufacturing Division and 2,001,500 units from other suppliers at $13.50 per unit. Assume 100,000 units are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $10.00 per unit. The Distribution Division sells the 100,000 units at a price of $17 each to customers. What is the operating income of both divisions together? A. $566,500 B. $952,000 C. $347,000 D. $401,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is
high−end
watches. Each division's costs are provided below:Manufacturing:Variable costs per unit $1.81
Fixed costs per unit $9.52
Distribution: Variable costs per unit $1.20
Fixed costs per unit $1.00
The Distribution Division has been operating at a capacity of 4,003,000 units a week and usually purchases 2,001,500 units from the Manufacturing Division and 2,001,500 units from other suppliers at $13.50 per unit.
Assume 100,000 units are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $10.00 per unit. The Distribution Division sells the 100,000 units at a price of $17 each to customers. What is the operating income of both divisions together?
A. $566,500
B. $952,000
C. $347,000
D. $401,000
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