Champ Company manufactures only one type of machine and has two divisions: Compressor and Fabrication. The Compressor Division manufactures compressors for the Fabrication Division, which completes the machine and sells it to retailers. The Compressor Division currently transfers compressors internally to the Fabrication Division. The market price for a compressor is $40.00. Current capacity for Champ Company is 10,000 machines.

Compressor's costs per compressor are:

Direct materials	$14.00
Direct labor	$7.00
Variable overhead	$3.00
Division fixed costs	$7.50

Fabrication's costs per completed air conditioner are:

Direct materials	$150.00
Direct labor	$62.55
Variable overhead	$20.00
Division fixed costs	$7.50

Assume the transfer price for a compressor is 140% of total costs of the Compressor Division and 1,200 of the compressors are produced and transferred to the Fabrication Division. The Compressor Division's operating income is ________.

Multiple Choice

• $15,120

• $10,080

• $11,520

• $37,800