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Gattor Golf Buggies Ltd. has two divisions. The Chassis Division prepares the sub-frame for the golf buggies at its factory. The Assembly Division prepares the sub-frame into the finished fully-functional golf buggy for sale to the customer. No inventories exist in either Division at the beginning of 2019. During the year 2019, the Chassis Division manufactured 600 sub-frames at a cost of $720,000. All the sub-frames were transferred to the Assembly Division, where additional operating costs of $500 per sub-frame were incurred. The 600 golf buggies were sold for $2,500,000.
Required:
Question 1: Determine the operating income for each division if the transfer price from Chassis to Assembly is at cost of $1,200 a sub-frame. Show all workings.
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