Materials used by Jefferson Company in producing Divisions product are currently purchased from outside suppliers...
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Materials used by Jefferson Company in producing Divisions product are currently purchased from outside suppliers at a cost of $10.00 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division Cat a variable cost of $5.50 per unit. A transfer price of $9.50 per unt is negotiated and 25,000 units of material are transferred, with no reduction in Division A's current sales Jefferson Company's total operating income will increase by Oa. $100.000 Ob. $150,000 O $62.500 Od 337,500
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