Question
brown Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high-end shoes. Each division's costs are provided below: Manufacturing: Variable costs per
brown Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high-end shoes. Each division's costs are provided below: Manufacturing: Variable costs per unit $1.36 Fixed costs per unit $5.77 Distribution: Variable costs per unit $1.30 Fixed costs per unit $0.50 The Distribution Division has been operating at a capacity of 4,009,000 units a week and usually purchases 2,004,500 units from the Manufacturing Division and 2,004,500 units from other suppliers at $13.00 per unit. Assume 110,000 units are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $8.00 per unit. The Distribution Division sells the 110,000 units at a price of $18 each to customers. What is the operating income of both divisions together? A) $347,600 B) $392,150 C) $997,700 D) $634,700
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