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Frocks and Gowns, Inc., has two divisions, Day Wear and Night Wear. The Day Wear...

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Accounting

Frocks and Gowns, Inc., has two divisions, Day Wear and Night Wear. The Day Wear Division has an investment base of $890,000 and produces (and sells) 120,000 units of Collars at a market price of $12.70 per unit. Variable costs total $7.80 per unit, and fixed charges are $3.90 per unit (based on a capacity of 140,000 units). The Night Wear Division wants to purchase 28,000 units of Collars from The Day Wear Division. However, the Night Wear Division is only willing to pay $8.45 per unit. What is the contribution margin for the Day Wear Division without the transfer to the Night Wear Division?

$120,000.

$588,000.

$1,014,000.

$1,010,000.

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