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(Solution) - The materials used by the Kenosha Division of Ehrlich Company

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The materials used by the Kenosha Division of Ehrlich Company are currently purchased from outside suppliers at $75 per unit. These same materials are produced by the High Point Division. The High Point Division can produce the materials needed by the Kenosha Division at a variable cost of $55 per unit. The division is currently producing 140,000 units and has capacity of 175,000 units. The two divisions have recently negotiated a transfer price of $65 per unit for 30,000 units. By how much will each division?s income increase as a result of this transfer?


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This question was answered on: Jul 11, 2017

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