Division L at Reiner Ltd. manufactures 17056 units of part #70, which it currently sells to outside customers. Selected data for part #70 are given below:

Unit selling price to outside customers

$90.27

Variable production cost per unit

54.98

Variable selling and administrative expense per unit

10.80

Total fixed production cost (based on a capacity of 19248 units per year)

$380000

Division K at Reiner Ltd. currently purchases 6815 units of part #70 from an outside supplier at a price of $85.95. Consideration is being given to buying internally rather than from the outside supplier. If an internal transfer takes place, it has been determined that variable S&A expense would be cut by one quarter for any sales made to Division K.Assume the two divisions agree on a transfer price of $79.78. What is the incremental income to division L if a transfer takes place?

Select one:

a.$42049

b.$593

c.$-17807

d.$60128