Use the following to answer questions 4-5:Division A produces a part with the following characteristics:Capacity in UnitsSelling Price per UnitVariable Costs per UnitFixed Costs per Unit50,000 units$30$18$ 3Division B, another division in the company, would like to buy this part from Division A.Division B is presently purchasing 4,000 parts from an outside source at $27 per unit. If DivisionA sells to Division B, $2 in variable costs can be avoided.4. Suppose Division A is currently operating at capacity and can sell all of the units itproduces on the outside market for its usual selling price. From the point of view ofDivision A, any sales to Division B should be priced no lower than which of thefollowing?A) $30.$18.B)C)D) $29.$28.5. Given the information in 4 above, what would the effect on the operating income of thecompany as a whole, if Division B continues to purchase all the parts from its outsidesource?A) $12,000 increaseB) $ 4,000 decreaseC) $12,000 decreaseD) $ 4,000 increase

solution : 4 Answer Division A is operating in full capacity so the transfer price shall be Variable…

Answered: Use the following to answer questions…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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