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Fern Productions has two divisions, A and B, both located in South Carolina. Division A produces 5000 units of Component X at a variable cost
Fern Productions has two divisions, A and B, both located in South Carolina. Division A produces 5000 units of Component X at a variable cost of $100 per unit and a fixed cost of $90,000 per year. Division A sells 4000 units of Component X at $275 per unit to outside parties and transfers 1000 units of Component X to Division B. Division B adds another $90 in variable costs to Component X, has fixed costs of $75,000 per year, and sells the final product, X-Plus, for $500 per unit. Assume there are no beginning or ending inventories or taxes. If Fern has decree a market-based transfer price, what is the annual operating income of Division B
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