Enter an increase as a positive number and a decrease as a negative number. Change in income for Division A $ Change in income for Division B $ Total change in income for Hibiscus Company ?

The materials used by the Hibiscus Company Division A are currently purchased from outside supplier at $52 per unit. Division B is able to supply Division A with 17,500 units at a variable cost of $50 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 17,500 units. By how much will each division's income and the company's total income change as a result of this transfer? Enter an increase as a positive number and a decrease as a negative number.

Change in income for Division A	$
Change in income for Division B	$
Total change in income for Hibiscus Company ?

Solutions

Expert Solution

Req (1) Calculation of change in income for Division A

Change in income for Division A = 17,500 * (52 - 48)

= 70,000

Req (2) Calculation of change in income for Division B

Change in income for Division B = 17,500 ( 48 -50)

= -35,000

Req (3) Calculation of total change in income for Hibiscus Company

Total change in income for Hibiscus Company = 70,000 - 35,000

= 35,000

Req 1 . Change in income for Division A = 70,000

Req 2. Change in income for Division B = 35,000

Req 3. Total Change in income for hibiscus Company = 35,000

balaji rao answered 2 years ago

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