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Division L at Reiner Ltd. manufactures 17,675 units of part #70, which it currently sells to outside customers. Selected data for part #70 are given
Division L at Reiner Ltd. manufactures 17,675 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 $88 Variable production cost per unit 58 Variable selling and administrative expense 10 per unit Total fixed production cost (based on a $380,000 capacity of 19,800 units per year) Division K at Reiner Ltd. currently purchases 7,425 units of part #70 from an outside supplier at a price of $83. 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 $80. What is the incremental income to Division Lif a transfer takes place
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