Find what amount beta division operating income increase

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Reference no: EM132666312

Problem (1.) The return on investment is useful because:

a. it overcomes some of the disadvantages of residual income.

b. it always leads divisional managers to accept new investments that could be profitable for the company as a whole.

c. it encourages division managers to maximize operating income in excess of the minimum.

d. the three factors subject to control by divisional managers (revenues, expenses, and invested assets) are considered.

Problem (2.) The Alpha Division of Blue Orchid Inc. purchases materials to be used in production from an outside supplier for $30 per unit. The same materials are produced by the Beta Division. Beta Division incurs variable costs of $15 per unit. Currently, Beta Division is able to sell only 290,000 units to outside buyers out of 360,000 units produced. In this situation, if a transfer price of $27 per unit is established between the two divisions and 70,000 units of materials are transferred to Alpha Division, by what amount would Beta Division's operating income increase?

a. $480,000

b. $840,000

c. $400,000

d. $340,000

Reference no: EM132666312

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