Income from operations increase problem

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Reference no: EM13259460

Materials used by Aro-Products Inc. in producing Division 3'sproduct are currently purchased from outside suppliers at a cost of$15 per unit. However, the same materials are available fromDivision 6. Division 6 has unused capacity and can produce thematerials needed by Division 3 at a variable cost of $12 per unit. A transfer price of $13 per unit is established, and 50,000 units of material are transferred with no reduction in Division 6'scurrent sales. How much would Division 3's income from operations increase?

a. $150,000

b. $50,000

c. $0

d. $100,000

Reference no: EM13259460

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