Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $40.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials $15.00 Direct labor $7.25 Variable overhead $3.00 Division fixed costs $7.50 Fabrication's costs per completed air conditioner are: Direct materials $150.00 Direct labor $62.50 Variable overhead $20.00 Division fixed costs $7.50 Assume the transfer price for a compressor is 150% of total costs of the Compressor Division and 1,000 of the compressors are produced and transferred to the Fabrication Division. The Compressor Division's operating income is ________. a. $15,875 b. $18,250 c. $16,375 d. $17,375
Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $40.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 10,000 units.
Compressor's costs per compressor are:
Direct materials $15.00
Direct labor $7.25
Variable overhead $3.00
Division fixed costs $7.50
Fabrication's costs per completed air conditioner are:
Direct materials $150.00
Direct labor $62.50
Variable overhead $20.00
Division fixed costs $7.50
Assume the transfer price for a compressor is 150% of total costs of the Compressor Division and 1,000 of the compressors are produced and transferred to the Fabrication Division. The Compressor Division's operating income is ________.
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