Materials used by the company in producing Division C's product are currently purchased from outside suppliers at a cost of $15 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $10.00 per unit. A transfer price of $11.00 per unit is negotiated, and 60,000 units of material
are transferred, with no reduction in Division A's current sales. How much would Division A's income from operations increase?
a. $0
b. $30,000
c. $90,000
d. $60,000
d
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