Reference no: EM132776566

Question - Division L at Reiner Ltd. manufactures 17521 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 $89.14

Variable production cost per unit 56.60

Variable selling and administrative expense per unit 10.58

Total fixed production cost (based on a capacity of 19303 units per year) $380000

Division K at Reiner Ltd. currently purchases 6966 units of part #70 from an outside supplier at a price of $84.16. 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 $80.82. What is the incremental income to division L if a transfer takes place?

a. $-399

b. $-18824

c. $74309

d. $23266